10 Check my work Wolfpack Company is a merchandising company that is preparing a

Question

10 Check my work Wolfpack Company is a merchandising company that is preparing a budget for the month of July. it has provided the following information Wolfpack Company Balance Sheet June 30 Assets Cash Accounts receivable Inventory Buildings and equipment, net of depreciation Total assets $ 77,600 58,200 41,800 176,000 353,600 Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings Total 1iabilities and stockholders equity $46,600 00,000 207,000 353,60 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 receivable at June 30 will be collected in July. 2. All merchandise purchases are on account. Twenty percent of merchandise inventory purchases are 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 $17,900.

Explanation / Answer

Expected cash collections for July = 102900. Out of this 58200 was collection from accounts receivables of June month. So collection of sales of July = 102900 - 58200 = 44700.

It was given that 30% of July sales will be collected in the July month itself.

Sales Budget for July = 44700 / 0.30 = 149000

Required - 1B

Total payment to merchandise purchase = 59700, out of this accounts payable is 46600

So paid for July purchases = 59700 - 46600 = 13100

Budgeted Merchandise purchases for July = 13100 / 0.20 = 65500

Required - 1C

Budgeted cost of goods sold = 89400

Required - 1D

Budgeted Net Operating Income = 29800

Required - 2 BALANCE SHEET

Explanation

Cash = 77600 of beginning balance + Net cash added during the month

Here net cash added = Net Income + depreciation = 29800 + 3520 - Increase in working capital ( excluding cash balance) = 29800 + 3520 - (69800 - 53400) = 94520

Purchases 65500 (+) Beginning Inventory 41800 (-) Ending Inventory 17900 Cost of goods sold 89400

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