Deacon Company is a merchandising company that is preparing a budget for the thr

Question

Deacon Company is a merchandising company that is preparing a budget for the three-month period ended June 30th. The following information is available Deacon Company Balance Sheet March 31 Assets Cash Accounts receivable Inventory Buildings and equipment, net of depreciation Total assets $55,400 41,200 53,200 180,000 $329,800 Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings $ 143,500 70,000 116,300 $ 329,800 Total liabilities and stockholders equity Budgeted Income Statements April May June Sales Cost of goods sold Gross margin Selling and administrative expenses 20,30e Net operating income $144,000 $154,000 $174,000 104,400 69,600 24,800 39,800 44,800 92,400 61,600 21,800 86,400 57,600 7,30 Budgeting Assumptions a, 60% of sales are cash sales and 40% of sales are credit sales. Twenty percent of all credit sales are collected in the month of sale and the remaining 80% are collected in the month subsequent to the sale b. Budgeted sales for July are $184,000. C. 10% of merchandise inventory purchases are paid in cash at the time of the purchase. The remaining 90% of purchases are credit purchases. All purchases on credit are paid in the month subsequent to the purchase d. Each month's ending merchandise inventory should equal $10,000 plus 50% of the next month's cost of goods sold e. Depreciation expense is $1,750 per month. All other selling and administrative expenses are paid in full in the month the expense is incurred

Explanation / Answer

ans 1 April May June Quarter July Total sales T $144,000 154000 174000 472000 184000 Credit sales C= (40%*T) $57,600 $61,600 $69,600 $188,800 Schedule of Expected Cash Collections Cash Sales (60% for cash) S $86,400 $92,400 $104,400 $283,200 Credit Sales same month D= (20%*T) $11,520 $12,320 $13,920 $37,760 Credit sales next month (C-D)*80% 41200 $46,080 $49,280 $136,560 Total Collections $139,120 $150,800 $167,600 $457,520 Merchandise Purchases Budget April May June Quarter April Budgeted Cost of Goods Sold (60%*sales) $86,400 $92,400 $104,400 $283,200 $110,400 Add Desired Ending Inventory (50%*next COGS)+10000 $56,200 $62,200 $65,200 $65,200.0 Total Needs $142,600 $154,600 $169,600 $348,400 Less Beginning Inventory $53,200 $56,200 $62,200 $53,200 Required Purcahses $89,400 $98,400 $107,400 $295,200 Schedule of Expected Cash Disbursements- Merchandise Purchases (10% in same month and 90% in next month) April May June Quarter March Purchases $143,500 $143,500 April Purchases $8,940 $80,460 $89,400 May Purchases $9,840 $88,560 $98,400 June Purchases $10,740 $10,740 Total cash Disbursements $152,440 $90,300 $99,300 $342,040 Cash Budget April May June Quarter Beginnning Cash Balance 55,400 $23,530 $63,980 55,400 Add Cash Collections 139,120 150,800 167,600 457,520 Total Cash Avail 194,520 174,330 231,580 512,920 Less Cash Disbursements For Inventory $152,440 $90,300 $99,300 $342,040 For Selling & administrative Expenses (excluding dep) 18550 20050 23050 61650 20300-1750 21800-1750 24800-1750 Total Cash Disbursements $170,990 $110,350 $122,350 $403,690 Excess(Deficiency) of Cash $23,530 $63,980 $109,230 $109,230 Ending Cash Balance $23,530 $63,980 $109,230 $109,230 Income statement sales 472000 Less;: Cost of Good sold $283,200 Gross profit $188,800 Less: S & A exp 66900 Net Income $121,900 Balance sheet Current assets Cash 109,230 Accounts receivable (69600*80%) 55,680 Inventory 65,200 Total Current assets 230,110 Building and equipment, net (180000-(1750*3)) 174750 Total assets 404,860 Liabilities & stockholder equity Current liabilities Accounts payable 96,660 Total current liabilities 96,660 stockholder equity Common stock 70000 Retained earnings (116300+121900) $238,200 Totl stockholder equity $308,200 Total Liabilities & stockholder equity $404,860

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