204-CRN 20812 Mark A. Torossian, CPA Minden Company is a wholesale distributor o

Question

204-CRN 20812 Mark A. Torossian, CPA Minden Company is a wholesale distributor of premium European chocolates. The balance sheet as of April 30 is given below company's Minden Company Balance Sheet Assets Cash Accounts receivable Inventory s 9,600 54,750 53,750 Buildings and equipment, net of depreciation 214,000 Total assets $332,100 Liabilities and Stockholders' Equity Accounts payable Note payable Common stock Retained earnings Total liabilities and stockholders' equity 70 50 $ 70,500 18,100 180,000 63,500 $332,100 company is in the process of preparing a budget for May and has assembled the following data a Sales are budgeted at $257.000 for May Of these sales, $77,100 will be for cash; the remainder will be credit sales. One-half of a month's credit sales are collected in the month the sales are made, and the remainder is collected in the following month. All of the April 30 accounts receivable will be collected in May Purchases be on account. Forty percent of all purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the April 30 accounts payable to suppliers b. of inventory are expected to total $121,000 during May. These purchases will all will be paid during May c. The May 31 inventory balance is budgeted at $31,000 administrative expenses for May are budgeted at $83,700, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,800 for The note payable on the April 30 balance sheet will be paid during May, with $340 in interest the month e (All of the interest relates to May.) f. New refrigerating equipment costing $13,100 will be purchased for cash during May g. During May, the company will borrow $22,000 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year Required: . Calculate the expected cash collections for May 2 Calcutate the expected cash disbursements for merchandise purchases for May 3. Prepare a cash budget for May 4. Prepare a budgeted income statement for May 5. Prepare a budgeted balance sheet as of May 31

Explanation / Answer

Schedule of expected cash collections Cash Sales - May 77100 Collections On accounts Receivables April 30 balance 54750 May sales 89950 Total Cash Receipts 221800 Schedule of expected cash disbursments April 30 accounts payable balance 70500 May Purchase 121000*40% 48400 Total Cash Payaments 118900 1-a. Schedule of cash receipts: Collections on account receivable for May sales = (290000-87000) = 50% × $203,000 = $101,500 Minden Company Cash Budget For the month of May Beginning cash Balance 9600 Add: Collections from customers 221800 Total Cash Available 231400 Less Cash Disbursments Purchse of inventory 118900 Selling and administrative expense 83700 Purchase of equipment 13100 Total Cash Disbursments 215700 Excess of cash available over disbursments 15700 Financing Borrowing Note 22000 Repaying Note -18100 Interest -340 Total Financing 3560 Ending Cash Balance 19260 Minden Company Budgeted Income Statement For the month of May Sales 257000 Cost of goods sold Beginning Inventory 53750 Purchases 121000 Goods available for sale 174750 Ending Inventory 31000 Cost of goods sold 143750 Gross Margin 113250 Selling and administrative Expense (83700+2800) 86500 Net Operating Income 26750 Interest Expense -340 Net Income 26410 Minden Company Balance Sheet For the month of May Assets Cash 19260 Accounts Receivable 89950 Inventory 31000 Buildings and equipment , net of dep (214000+13100-2800) 224300 Total Assets 364510 Liabilities and Stockholder's Equity Accounts Payable (121000*0.6) 72600 Note Payable 22000 Common stock 180000 Retained Earnnings (63500+ 89910 Total Liabilities 364510 1-a. Schedule of cash receipts: Collections on account receivable for May sales = (257000-77100) = 50% × $179,900 = $89950

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