Weltin Industrial Gas Corporation supplies acetylene and other compressed gases
ID: 2435599 • Letter: W
Question
Weltin 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, $370,000 for December, and $380,000 for January.
· Collections are expected to be 90% in the month of sale, 5% in the month following the sale, and 5% uncollectible.
· The cost of goods sold is 60% of sales.
· The company purchases 70% of its merchandise in the month prior to the month of sale and 30% in the month of sale. Payment for merchandise is made in the month following the purchase.
· Other monthly expenses to be paid in cash are $21,800.
· Monthly depreciation is $18,000.
· Ignore taxes.
Statement of Financial Position
October-10
Assets
Cash $ 25,000.00
Accounts Receivable (net of allowance for uncollectible accounts) $ 71,000.00
Inventory $ 163,800.00
Property, plant and equipment (net of $ 504,000 accumulated depreciation) $1,088,000.00
Total assets $1,347,800.00
Liabilities and Stockholders' Equity
Acounts payable $ 232,000.00
Common stock $ 700,000.00
Retained earnings $ 415,800.00
Total Liabilities and stockholders' equity $1,347,800.00
Required:
a. Prepare a Schedule of Expected Cash Collections for November and December.
b. Prepare a Merchandise Purchases Budget for November and December.
c. Prepare Cash Budgets for November and December.
d. Prepare Budgeted Income Statements for November and December.
e. Prepare a Budgeted Balance Sheet for the end of December.
Explanation / Answer
a. Prepare a Schedule of Expected Cash Collections for November and December.
Schedule of Expected cash collections
------------------------------------------------
November December
Sales 390,000 370,000
______________________________________________________
Accounts Receivables 71,000
November Sales 390,000x90% 351,000
390,000x5% 19,500
December Sales 370,000x90% 333,000
______________________________________________________
Total cash collection 422,000 352,500
======================================================
b. Prepare a Merchandise Purchases Budget for November and December.
Merchandise Purchase Budget
-----------------------------------
November December
Cost of goods sold 234,000 222,000
390,000 x 60% 370,000 x 60%
______________________________________________________
November Sales 234,000x30% 70,200
December Sales 222,000x70% 155,400
222,000x30% 66,600
January sales 380,000x60%x70% 159,600
______________________________________________________
Total Purchases 225,600 226,200
Total payments to suppliers 232,000 225,600
======================================================
c. Prepare Cash Budgets for November and December.
Cash Budget
-----------------
November December
Cash receipts 422,000 352,500
______________________________________________________
Cash disbursement:
Payments to suppliers 232,000 225,600
Other monthly expenses 21,800 21,800
______________________________________________________
Total cash disbursement 253,800 247,400
======================================================
Excess/(deficiency) of cash
over disbursement 168,200 105,100
Cash at the beginning 25,000 193,200
________________________________________________________
Cash at the end 193,200 298,300
========================================================
d. Prepare Budgeted Income Statements for November and December.
November December
Sales 390,000 370,000
______________________________________________________
Bad debts 5% of sales 19,500 18,500
Cost of goods sold 234,000 222,000
______________________________________________________
253,500 240,500
______________________________________________________
Gross profit 136,500 129,500
______________________________________________________
Other expenses 21,800 21,800
Depreciation 18,000 18,000
______________________________________________________
39,800 39,800
______________________________________________________
Net operating Income 96,700 89,700
______________________________________________________
e. Prepare a Budgeted Balance Sheet for the end of December.
Statement of Financial Position as on December 31
-------------------------------------------------------------
Assets :
Cash 298,300
Accounts receivables 370,000 x 5% 18,500
(net of allowance for uncollectible accounts)
Inventory 159,600
Prpoerty, Plant and equipment 1,052,000
(net of $540,000 accumulated depreciation)
__________
Total Assets 1,528,400
==========
Liabilities and Shareholders' equity:
Accounts payables 226,200
Common Stock 700,000
Retained Earnings 602,200
__________
Total liabilities and shareholders' equity 1,528,400
==========
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.