Weldon Industrial Gas Corporation supplies acetylene and other compressed gases
ID: 2576890 • Letter: W
Question
Weldon Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow:
• Sales are budgeted at $360,000 for November, $380,000 for December, and $350,000 for January.
• Collections are expected to be 75% in the month of sale, 20% in the month following the sale, and 5% uncollectible.
• The cost of goods sold is 65% of sales.
• The company desires an ending merchandise inventory equal to 60% 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 $61,900.
• Monthly depreciation is $20,000.
• Equipment purchased in December of $55,000.
• Dividend paid in December of $75,000.
• Financing: If cash is over $50,000 at the end of any month, pay back loan in increments of $5,000. If cash is under 15,000 at the end of any month, borrow in $5,000 increments.
• Ignore taxes.
Balance Sheet
October 31
Assets:
Cash $ 16,000
Accounts receivable (net of allowance for uncollectible accounts) 74,000
Merchandise inventory 140,400
Property, plant and equipment (net of $500,000 accumulated depreciation) 1,066,000
Total assets $1,296,400
Liabilities and Stockholders’ Equity:
Accounts payable $ 240,000
Notes payable 115,000
Common stock 640,000
Retained earnings 301,400
Total liabilities and stockholders’ equity $1,296,400
d. Prepare Budgeted Income Statements for November and December.
e. Prepare a Budgeted Balance Sheet for the end of December.
d. November December
Sales $ $
Cost of goods sold .
Gross margin .
Bad debt expense
Other monthly expenses
Depreciation .
Total expenses .
Net operating income $ $ .
e. Balance Sheet
December 31
Assets:
Cash $
Accounts receivable (net of allowance for uncollectible accounts)
Merchandise inventory
Property, plant and equipment (net of $540,000 accumulated depreciation) .
Total assets $ .
Liabilities and Stockholders’ Equity:
Accounts payable $
Notes payable
Common stock
Retained earnings .
Total liabilities and stockholders’ equity $ .
Explanation / Answer
November December Jan Sales $360,000 $380,000 350000 Schedule of expected cash collection Accounts Receivable 74000 November sales $270,000 $72,000 December sales $285,000 Total cash collection $344,000 $357,000 Accounts Rec (380000*20%) 76000 November December Jan Budgeted Cost of Good sold $234,000 $247,000 $227,500 Add: desired Ending Inventory (60%of COGS) $148,200 $136,500 total needs $382,200 $383,500 Less: beginning Inventory 140400 $148,200 Required Purchases $241,800 $235,300 Cash Budget November December Cash disbursement for mercandise 240000 $241,800 Other monthly cash expense 61900 61900 Purcahse of Equipment 55000 Payment of Dividend 75000 Total cash disb 301900 $433,700 Beginning cash balance 16000 $18,100 Add: Cash receipt $344,000 $357,000 Total cash availabale $360,000 $375,100 Less: cash disb 301900 433700 Excess/(deficiency) $58,100 ($58,600) Financing -40000 75000 Ending cash balance $18,100 $16,400 Budgeted Income statement Sales $360,000 $380,000 Cost of good sold $234,000 $247,000 Gross profit $126,000 $133,000 Less: Other monthly expenses 61900 61900 Bad Debt expenses $18,000 $19,000 Depreciation 20000 20000 Total operating expenses 99900 100900 Net Income $26,100 $32,100 Balance Sheet 31-Dec Asseys Cash $16,400 Accounts Receivable 76000 Inventory $136,500 Property plant (1066000-40000+55000) 1081000 Total Assets $1,309,900 Liabilities & Stockholder equity Accounst Payable $235,300 Notes payable (115000-40000+75000) 150000 Common stock 640000 Retained Earnings (301400+26100+32100-75000) 284600 Total Liabilities & Stockholder equity $1,309,900
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