Problem 8-17 Cash Budget; Income Statement; Balance Sheet [LO8-2, LO8-4, LO8-8,

Question

Problem 8-17 Cash Budget; Income Statement; Balance Sheet [LO8-2, LO8-4, LO8-8, LO8-9, LO8-10]

Minden Company is a wholesale distributor of premium European chocolates. The company’s balance sheet as of April 30 is given below:

224,000

351,400

85,900

351,400

Sales are budgeted at $220,000 for May. Of these sales, $66,000 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 of inventory are expected to total $128,000 during May. These purchases will all 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 will be paid during May.

Selling and administrative expenses for May are budgeted at $86,000, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $6,750 for the month.

The note payable on the April 30 balance sheet will be paid during May, with $565 in interest. (All of the interest relates to May.)

During May, the company will borrow $25,300 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.

Prepare a schedule of expected cash collections from sales and a schedule of expected cash disbursements for merchandise purchases..

Prepare a cash budget for May. (Cash deficiency, repayments and interest should be indicated by a minus sign.)

Prepare a budgeted balance sheet as of May 31.

Minden Company is a wholesale distributor of premium European chocolates. The company’s balance sheet as of April 30 is given below:

Explanation / Answer

Schedule of Expected Cash Collections Cash sales—May 66000 Collections on account receivable: April 30 balance 75000 May sales (220000-66000)*.5 77000 Total cash receipts 218000 Schedule of Expected Cash Disbursements April 30 accounts payable balance 70000 May purchases 51200 Total cash payments 121200 Minden Company Cash Budget For the Month of May Beginning cash balance 11400 Add collections from customers 218000 Total cash available 229400 Less cash disbursements: Purchase of inventory 121200 Selling and administrative expenses 86000 Purchases of equipment 6700 Total cash disbursements 213900 Excess of cash available over disbursements 15500 Financing: Borrowing—note 25300 Repayments—note -15500 Interest -565 Total financing 9235 Ending cash balance 24735 Prepare a budgeted income statement for May. Minden Company Budgeted Income Statement For the Month of May Sales 220000 Less: cost of good sold 113000 (41000+128000-56000) Gross profit 107000 Less: Selling & adm expenses 92750 Net operating Income 14250 Less: interest expenses 565 Net Income 13685 Minden Company Balance Sheet 31-May Assets   Cash 24735   Accounts receivable 77000   Inventory 56000   Buildings and equipment, net of depreciation 223950 (224000+6700-6750)   Total assets 381685 Liabilities and Stockholders’ Equity   Accounts payable 76800   Note payable 25300   Common stock 180000   Retained earnings 99585   Total liabilities and stockholders’ equity 381685

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