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-* BONUS Homework | eztomheducation.com/hm.tpx?.-0.9292225840000428-1511833370618 Weldon Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow Sales are budgeted at $320,000 for November, $340,000 for December, and $330,000 for January . Collecti sare expected to be 70% in the month of sale, 28% in the month following the sale, and 2% The cost of goods sold is 75% of sales. The company desires an ending merchandise inventory equal to 75% 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 $20,500 Monthly depreciation is $15,500. Ignore taxes. Balance Sheet October 31 Assets Cash Accounts recelvable (net of allowance for uncollectible accounts) Merchandise Inventory Property, plant and equipment (net of S655.000 accumulated depreciation) S 21,500 81,500 180,000 1.170 00 . Total assets $ 1,453.000 Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings 198.500 780,000 474,500 Total lablities and stockholders equity 453000 Required a, prepare a Schedu·of Epected Cash Collectontor November and Dagames,Explanation / Answer
Solution (a)
WELDON INDUSTRIAL GAS CORPORATION
Schedule of Expected Cash Collections
Particulars
November ( in $)
December (in $)
SALES
3,20,000
3,40,000
Schedule of Expected Cash Collections
Account receivables
81,500*
89,600
November Sales
2,24,000
0
December Sales
0
2,38,000
Total Cash collections
3,05,500
3,27,600
*$ 81,500 account receivable is taken from given balance sheet of October month. As per given data @8% of the sales mount will be collected in month following the sale. It means 28% of October sales (in the form of account receivable) are collected in November.
Working Note for the classification of amount of sales:
November Sales: $ 3, 20,000
November Sales: $ 3, 40,000
Solution (b)
WELDON INDUSTRIAL GAS CORPORATION
Merchandise Purchases Budget
Particulars
November ( in $)
December (in $)
Budgeted cost of goods sold
2,40,000
2,55,000
Total Needs
2,51,250
2,49,375
Required purchase
2,51,250
2,49,375
Working Note: As per given information:
-Cost of goods sold is 75% of sales.
-Company desires ending merchandise equal to 75 % of cost of goods sold in the following month.
-As per accounting rules ending merchandise of current period is beginning merchandise of following period.
Calculations:
October ($) November ($) December ( $) January ( $)
Sales - 3, 20,000 3, 40,000 3, 30,000
Cost of goods sold - 2, 40,000 2, 55,000 2, 47,500
(75 % of sales of
same month)
Ending merchandise 1, 80,000* 1, 91,250 1, 85,625 -
(75 % of cost of goods
sold in the following month)
**Total Purchases - 2, 51,250 2, 49,375 -
*Given in balance sheet of October.
** Total Purchases or needs = Cost of goods sold + Ending merchandise – Beginning Merchandise
Solution (c)
WELDON INDUSTRIAL GAS CORPORATION
Cash Budget
Particulars
November ( in $)
December (in $)
Cash disbursement for merchandise
1,98,500*
2,51,250
Other monthly cash expense
20,500
20,500
Total cash disbursement
2,19,000
2,71,750
Cash balance , beginning
21,500
1,08,000
Add: Cash receipts
3,05,500**
3,27,600**
Total Cash Available
3,27,000
4,35,600
Less: Cash Disbursement
2,19,000
2,71,750
Excess of cash available over disbursement
1,08,000
1,63,850
Financing
0***
0***
Cash Balance ending
1,08,000
1,63,850
*As per given information payment for purchase is to be made in the following month. It means account payable of October $ 1, 98,500 will be paid in November.
**Refer to solution a (total cash collection)
*** As there are no borrowed funds, financing amount will be 0.
Note: Ending cash balance of November will be beginning balance of cash in December.
Solution (d)
WELDON INDUSTRIAL GAS CORPORATION
Budgeted Income Statement
Particulars
November ( in $)
December (in $)
Sales
3, 20,000
3, 40,000
Less: Cost of goods sold
2, 40,000
2, 55,000
Gross Profit
80,000
85,000
Less: Expenses
Monthly expenses
20,500
20,500
Depreciation expenses
15,500
15,500
Bad debts (Uncollectible amount of sales)
6,400*
6,800*
Operating Income
37,600
42,200
Less: Interest Expense
0
0
Income Before Tax
37,600
42,200
Less: Tax
0
0
Net income After Tax
37,600
42,200
* Refer to working notes of solution a.
Note: As there are no interest and tax expenses, steps done after operating income cab be ignored. Because operating income will be Net Income in that case.
Particulars
November ( in $)
December (in $)
SALES
3,20,000
3,40,000
Schedule of Expected Cash Collections
Account receivables
81,500*
89,600
November Sales
2,24,000
0
December Sales
0
2,38,000
Total Cash collections
3,05,500
3,27,600
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