1. Weltin Industrial Gas Corporation supplies acetylene and other compressed gas
ID: 2435591 • Letter: 1
Question
1.
Weltin Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow:
· Sales are budgeted at $390,000 for November, $370,000 for December, and $380,000 for January.
· Collections are expected to be 90% in the month of sale, 5% in the month following the sale, and 5% uncollectible.
· The cost of goods sold is 60% of sales.
· The company purchases 70% of its merchandise in the month prior to the month of sale and 30% in the month of sale. Payment for merchandise is made in the month following the purchase.
· Other monthly expenses to be paid in cash are $21,800.
· Monthly depreciation is $18,000.
· Ignore taxes.
Statement of Financial Position
October-10
Assets
Cash
$ 25,000.00
Accounts Receivable (net of allowance for uncollectible accounts)
$ 71,000.00
Inventory
$ 163,800.00
Property, plant and equipment (net of $ 504,000 accumulated depreciation)
$1,088,000.00
Total assets
$1,347,800.00
Liabilities and Stockholders' Equity
Acounts payable
$ 232,000.00
Common stock
$ 700,000.00
Retained earnings
$ 415,800.00
Total Liabilities and stockholders' equity
$1,347,800.00
Required:
a. Prepare a Schedule of Expected Cash Collections for November and December.
b. Prepare a Merchandise Purchases Budget for November and December.
c. Prepare Cash Budgets for November and December.
d. Prepare Budgeted Income Statements for November and December.
e. Prepare a Budgeted Balance Sheet for the end of December.
Explanation / Answer
a. Prepare a Schedule of Expected Cash Collections for November and December. November December October outstanding 71,000 November Sales 351,000 19,500 December Sales 333,000 Total 422,000 352,500 b. Prepare a Merchandise Purchases Budget for November and December. November December January Sales of the month 390,000 370,000 380,000 Cost of goods sold (60%) 234,000 222,000 228,000 Purchase of current month (30%) 70,200 66,600 Purchase of next month (70%) 155,400 159,600 Total Purchases 225,600 226,200 c. Prepare Cash Budgets for November and December. November December January Beginning cash balance 25,000 193,200 Add Cash receipts 422,000 352,500 Less Paid for purchases 232,000 225,600 Other expenses 21,800 21,800 Closing cash balance 193,200 298,300 d. Prepare Budgeted Income Statements for November and December. November December Sales 390,000 370,000 Less: Uncollectible 19,500 18,500 Net Sales 370,500 351,500 Less: Cost of goods sold 234,000 222,000 Gross Margin 136,500 129,500 Less Other expenses 21,800 21,800 Depreciation 18,000 18,000 Net Income 96,700 89,700 e. Prepare a Budgeted Balance Sheet for the end of December. Assets Cash $ 298,300.00 Accounts Receivable (net of allowance for uncollectible accounts) $ 18,500.00 Inventory $ 159,600.00 Property, plant and equipment (net of $ 540,000 accumulated depreciation) $1,052,000.00 Total assets $1,528,400.00 Liabilities and Stockholders' Equity Acounts payable $ 226,200.00 Common stock $ 700,000.00 Retained earnings $ 602,200.00 Total Liabilities and stockholders' equity $1,528,400.00
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