Budgeted Income Statement and Balance Sheet LO 8-2 LO 8-3, 8-9, t08-10 ny is a m

Question

Budgeted Income Statement and Balance Sheet LO 8-2 LO 8-3, 8-9, t08-10 ny is a merchandising company that is preparing a budget for the month of July 18 Cash Flows; Incom Wollpack Company pd the following information: It has provided Wolfpack Company Balance Sheet June 30 Assets Cash Accounts receivable. Inventory Buildings and equipment, net of depreciation $ 75,000 50,000 30,000 150,000 $305,000 Total assets Liabilities and Stockholders' Equity Accounts payable Retained earnings Total liabilities and stockholders' equity 35,300 269,700 $305,000 Budgeting Assumptions: 1. All sales are on account. Thirty percent of the credit sales are collected in the month of sale and the remaining 70% are collected in the month subsequent to the sale. The accounts receiv- able at June 30 will be collected in July. paid in the month of the purchase and the remaining 80% is paid in the month after the purchase. 3. The budgeted inventory balance at July 31 is $22,000. 4. Depreciation expense is $3,000 per month. All other selling and administrative expenses are paid in full in the month the expense is incurred. 5. The company's cash budget for July shows expected cash collections of $77,000, expected cash disbursements for merchandise purchases of $44,500, and cash paid for selling and administrative expenses of $15,000 Required For the month of July, calculate the following a. Budgeted sales b. Budgeted merchandise purchases Budgeted cost of goods sold d. Budgeted net operating income Prepare a budgeted balance sheet as of July 31

Explanation / Answer

1 For the month of July, a Budgeted sales Cash collection in July $77,000 Less: Cash collected for A/R for June $50,000 Cash collection for July sales (30%) $27,000 Total budgeted credit sales for July (27000/30%) $90,000 b Budgeted merchandise purchase Cash disbursement for merchandise purchase $44,500 Less: Cash paid for A/P for June $35,300 Cash paid for July purchases (20%) $9,200 Total budgeted merchandise purchases for July $46,000 (9200/20%) c Budgeted cost of goods sold Beginning Inventory $30,000 Add: Purchases $46,000 Less: Ending inventory ($22,000) Budgeted cost of goods sold $54,000 d Budgeted net operating income Sales $90,000 Cost of goods sold $54,000 Gross Profit $36,000 Operating expenses: Selling and administrative expenses $15,000 Depreciation $3,000 Total Operating expenses $18,000 Net Operating Income $18,000 2 Budgeted Balance sheet as of July 31 Assets: Cash $92,500 Accounts Receivable $63,000 Inventory $22,000 Building and equipment, net of depreciation $147,000 Total assets $324,500 Liabilities and Stockholders Equity: Accounts Payable $36,800 Retained Earnings $287,700 Total Liabilities and Stockholders Equity $324,500 Cash = $77000-$44500-$15000+$75000(Opening Balance) = $92500 Accounts receivable = 90000 x 70% = $63000 Accounts Payable = $46000 x 80% = $36800 Building and Equipment = $150000-$3000(Depr.) = $147000

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