Wolfpack Company is a merchandising company that is preparing a budget for the m

Question

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 $ 81,800 Accounts receivable 69,600 Inventory 46,000 Buildings and equipment, net of depreciation 186,000 Total assets $ 383,400 Liabilities and Stockholders’ Equity Accounts payable $ 62,400 Common stock 100,000 Retained earnings 221,000 Total liabilities and stockholders’ equity $ 383,400 Budgeting Assumptions: 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. 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. The budgeted inventory balance at July 31 is $36,700. Depreciation expense is $3,720 per month. All other selling and administrative expenses are paid in full in the month the expense is incurred. The company’s cash budget for July shows expected cash collections of $100,500, expected cash disbursements for merchandise purchases of $72,900, and cash paid for selling and administrative expenses of $16,880. Required: 1. For the month of July, calculate the following: a. Budgeted sales b. Budgeted merchandise purchases c. Budgeted cost of goods sold d. Budgeted net operating income 2. Prepare a budgeted balance sheet as of July 31.

Explanation / Answer

1a) Cash collection 100,500 less:accounts receivable collected 69,600 Cash collected from july sale 30,900 30% is collected in the month of sale which is $30,900 hence 100%   = 30,900/30% 103000 Budgeted sales for July $103,000 1b) Cash payment 72,900 less:Accounts payable 62,400 Cash paid for the month of july 10,500 20% of merchandise is paid in the month of purchase hence 100%   = 10500/20% 52500 Budgeted merchandise purchase for july $52,500 1c) Budgeted cost of goods sold inventory,beginning 46,000 Add merchandise purchase for july 52,500 less inventory,ending -36,700 Budgeted cost of goods sold 61,800 Budgeted cost of goods sold for July $61,800 1d) Budgeted net operating income for July sales 103,000 less cost of goods sold 61,800 gross profit 41,200 less:Expenses Depreciation expense 3,720 Selling & administrative expense 16,880 20,600 Budgeted net operating income for July 20,600 Budgeted net operating income for july $20,600 2) Cash budget opening cash balance 81,800 Add:cash collection 100,500 total cash receipts 182,300 less :disbursements merchandise purchase 72,900 selling & administrative expense 16,880 total disbursements 89,780 cash end balance 92,520 Accounts receivable on july end 103000*70% 72100 Accounts payable on july end   52500*80% 42000     Wolfpack Balance Sheet Assets Cash 92,520 Account receivable 72100 inventory 36,700 buildings &equipment net of dep (186000-3720) 182280 total assets 383,600 liabilities & stockholder's equity Accounts payable 42000 common stock 100,000 Retained earnings (221,000+20600) 241600 total liabilities & stockholders Equity 383600

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