Welnor Industrial Gas Corporation supplies acetylene and other compressed gases

Question

Welnor Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow: Sales are budgeted al S340.000 for November. $360.000 for December. and $350.000 for January. Collections are expected to be 75% in the month of sale. 23% in the month following the sale, and 2% uncollectible. The cost of goods sold is 71% of sales. The company desires ending merchandise inventory to equal 75% of the following month's cost of goods sold Payment for merchandise is made in the month following the purchase Other monthly expenses to be paid in cash are $21.200. Monthly depreciation is S16.200. Ignore taxes

Explanation / Answer

November December January Sales       340,000          360,000          350,000 Cash collection       255,000          270,000          262,500 Cash collection 23% In following month             78,200            82,800 Cost of goods sold       241,400          255,600          248,500 Desired ending inventory @ 75% of following month COGS       191,700          186,375 Payement for purchases          191,700          186,375 Monthly expenses paid in cash          21,200             21,200            21,200 Monthly depreciation          16,200             16,200            16,200 Profit          61,200             67,000            64,100 Balance sheet October November December Cash          22,200          256,000          391,300 Accounts receivable ( net of allowance for uncollectible debt)          82,200             71,400            75,600 Merchandise inventory       181,050          191,700          186,375 Property plant and equipment( net of $660,000 accumulated dep)    1,170,000       1,153,800      1,137,600 Total assets    1,455,450       1,509,150      1,570,825 Liabilities Accounts payable       199,200          191,700          186,375 Common stock       860,000          860,000          860,000 Retained earnings       396,250          457,450          524,450    1,455,450       1,509,150      1,570,825 Total liabilities and equity cash collection November December sales          360,000          350,000 accounts receivable             82,200 november sales          270,000            78,200 december sales          262,500 total cash collections          712,200          690,700 November December Cost of goods sold          241,400          255,600 Desired ending inventory @ 75% of following month COGS          191,700          186,375 Required purchase          433,100          441,975 November December Payement for purchases          191,700 Monthly expenses paid in cash             21,200            21,200 Total cash disbursement             21,200          212,900 Cash balance beginning             22,200          256,000 Add cash receipts          255,000          348,200 Total cash available          277,200          604,200 Less cash disbursement             21,200          212,900 cash available          256,000          391,300 cash balance ending          256,000          391,300

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