Weldon Industrial Gas Corporation supplies acetylene and other compressed gases

Question

Weldon Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow Sales are budgeted at $370,000 for November, $390,000 for December, and $380,000 for January ·Collections are expected to be 80% in the month of sale, 17% in the month following the sale, and 3% uncollectible The cost of goods sold is 71% of sales. The company desires an ending merchandise inventory equal to 80% of the cost of goods sold in the following month. Payment for merchandise is made in the month following the purchase Other monthly expenses to be paid in cash are $20,900. Monthly depreciation is $15,900 lgnore taxes Balance Sheet October 31 Assets Cash Accounts receivable (net of allowance for uncollectible accounts) Merchandise Inventory Property, plant and equipment (net of $671,000 accumulated depreciation) $21,900 81,900 210,160 1,170,000 Total assets $1,483,960 Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings $ 198,900 820,000 465,060 Total liabilities and stockholders' equity $1,483,960

Explanation / Answer

Solution:

a) Schedule of Expected Cash Collection

Schedule of Expected Cash Collections

November

December

Sales

$370,000

$390,000

Schedule of Expected Cash Collections

Accounts Receivable

$81,900

November Sales

$296,000

$62,900

December Sales

$312,000

Total Collection

$377,900

$374,900

b) Merchandise Purchase Budget

Merchandise Purchase Budget

November

December

Budgeted Cost of Goods Sold

$262,700

$276,900

Add: Desired Ending Inventory (70% of next months COGS)

$193,830

$215,840

(Jan 380,000*71%*80%)

Total Needs

$456,530

$492,740

Less: Beginning Inventory (Ending Inventory of last month)

$210,160

(given)

$193,830

Required Purchases

$246,370

$298,910

c) Cash Budget

Cash Budget

November

December

Cash disbursements for merchandise

198900

246370

Other monthly cash expenses

20900

20900

Total cash disbursements

219800

267270

Cash balance at beginning

$21,900

$180,000

Add: cash receipts

$377,900

$374,900

Total cash available

$399,800

$554,900

Less: Cash disbursements

$219,800

$267,270

Excess (deficiency) of cash available over disbursements

$180,000

$287,630

Financing

$0

$0

Cash balance, ending

$180,000

$287,630

d) Budgeted Income Statement

Budgeted Income Statement

November

December

Sales Revenue

$370,000

$390,000

Cost of Goods Sold (71% of Sales)

$262,700

$276,900

Gross Profit

$107,300

$113,100

Expenses:

Other monthly expenses

$20,900

$20,900

Monthly Depreciation

$15,900

$15,900

Bad Debt (3% of Sales)

$11,100

$11,700

Total Expenses

$47,900

$48,500

Operating Income (Gross Profit - Total Expenses)

$59,400

$64,600

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Pls ask separate question for remaining part.

Schedule of Expected Cash Collections

November

December

Sales

$370,000

$390,000

Schedule of Expected Cash Collections

Accounts Receivable

$81,900

November Sales

$296,000

$62,900

December Sales

$312,000

Total Collection

$377,900

$374,900

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.