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 $390,000 for November, $410,000 for December, and $400,000 for January Collections are expected to be 80% in the month of sale, 15% in the month following the sale, and 5% uncollectible The cost of goods sold is 73% 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 $20,700. . Monthly depreciation is $15,700. e Ignore taxes Balance Sheet October 31 Assets Cash Accounts receivable (net of allowance for uncollectible accounts) Merchandise Inventory Property, plant and equipment (net of $657,000 accumulated depreciation) $21,700 81,700 227,760 1,170,000 Total assets S 1,501,160 Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings $ 198,700 800,000 502,460 $1,501,160 Total liabilities and stockholders' equity

Explanation / Answer

Solution:

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November December Sales 390,000 410,000 Schedule of expected cash collections Accounts Receivable 81,700 November Sales 312000 58500 390,000 x 80%, 390,000 x 15% December Sales 328000 410,000 x 80% Total cash collections 393,700 386500

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