Welnor Industrial Gas Corporation supplies acetylene and other compressed gases

Question

Welnor Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow:

Sales are budgeted at $340,000 for November, $360,000 for December, and $350,000 for January.

Collections are expected to be 75% in the month of sale, 22% in the month following the sale, and 3% uncollectible.

The company desires ending merchandise inventory to equal 80% of the following month's cost of goods sold. Payment for merchandise is made in the month following the purchase.

Required:

Prepare a Schedule of Expected Cash Collections for November and December. (Omit the "$" sign in your response.)

Prepare a Merchandise Purchases Budget for November and December. (Input all amounts as positive values. Do not round intermediate calculations. Omit the "$" sign in your response.)

Prepare Cash Budgets for November and December. (Leave no cells blank - be certain to enter "0" wherever required. Input all amounts as positive values. Omit the "$" sign in your response.)

Prepare Budgeted Income Statements for November and December. (Input all amounts as positive values. Omit the "$" sign in your response.)

Prepare a Budgeted Balance Sheet for the end of December. (Be sure to enter your answers in the order of liquidity. Input all amounts as positive values. Omit the "$" sign in your response.)

•

Sales are budgeted at $340,000 for November, $360,000 for December, and $350,000 for January.

•

Collections are expected to be 75% in the month of sale, 22% in the month following the sale, and 3% uncollectible.

• The cost of goods sold is 68% of sales. •

The company desires ending merchandise inventory to equal 80% of the following month's cost of goods sold. Payment for merchandise is made in the month following the purchase.

• Other monthly expenses to be paid in cash are $22,000. • Monthly depreciation is $17,000. • Ignore taxes.

Explanation / Answer

Welnor Industrial Gas Corporation Schedule of Expected Cash Collections ($) November December   Sales 340000 360000   Schedule of Expected Cash Collections   Accounts receivable 83000   November sales 255000 74800   December sales 270000   Total cash collections 338000 344800 Welnor Industrial Gas Corporation Merchandise Purchases Budget ($) November December Budgeted cost of goods sold 231200 244800 Add: Desired ending merchandising inventory 195840 190400 Total needs 427040 435200 Deduct: Beginning merchandise inventory 184960 195840 Required purchase 242080 239360 Welnor Industrial Gas Corporation Cash Budget ($) November December Cash disbursements for merchandise 200000 242080 Other monthly cash expenses 22000 22000 Total cash disbursements 222000 264080 Cash balance, beginning 23000 139000 Add cash receipts 338000 344800 Total cash available 361000 483800 Less cash disbursement 222000 264080 Excess (deficiency) of cash available over disbursements 139000 219720 Financing 0 0 Cash balance, ending 139000 219720 Welnor Industrial Gas Corporation Budgeted Income Statement ($) November December Sales 340000 360000 Cost of goods sold 231200 244800 Gross profit 108800 115200 depreciation 17000 17000 other monthly expenses 22000 22000 Bad debt expense 10200 10800 Net Operating Income 59600 65400 Welnor Industrial Gas Corporation Budgeted Balance Sheet Dec-31 ($) Assets Cash 219720 Accounts receivable (net of Bad debt) 79200 Merchandise Inventory 190400 Plant Property and equipment 1136000   Total assets 1625320 Liabilities and Stockholders’ Equity Accounts payable 239360 Common Stock 940000 Retained earnings 445960 Total liabilities and stockholders’ equity 1625320

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