Welnor Industrial Gas Corporation supplies acetylene and other compressed gases
ID: 2464142 • Letter: W
Question
Welnor 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.
o Collections are expected to be 75% in the month of sale, 20% in the month following the sale, and 5% uncollectible.
o The cost of goods sold is 65% of sales. o The company desires ending merchandise inventory to equal 80% of the following month's cost of goods sold. Payment for merchandise is made in the month following the purchase.
o Other monthly expenses to be paid in cash are $21,000.
o Monthly depreciation is $16,000.
o Ignore taxes.
Statement of Financial Position
October 31
Assets
Cash $22,000
Accounts receivable (net of allowance for uncollectible accounts) $82,000
Merchandise inventory $166,400
Property, plant and equipment (net of $658,000 accumulated depreciation) $1,170,000
Total assets $1,440,400
Liabilities and Stockholders' Equity
Accounts payable $199,000
Common stock $840,000 Retained Earnings $401,400
Total liabilities and stockholders' equity $1,440,400
Required:
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
b. Merchandise purchase budget: October November December January Sale 320000 340000 330000 cogs 208000 221000 214500 opening stock 166400 closing stock required 176800 171600 purchase 218400 215800 c. Cash Budget November December January Sale 3,20,000 3,40,000 3,30,000 cogs 2,08,000 2,21,000 2,14,500 purchase 2,18,400 2,15,800 Collection 2,40,000 2,55,000 2,47,500 receivable collection 82,000 64,000 68,000 payment for purchase -1,99,000 -2,18,400 -2,15,800 Payment for exp. -21,000 -21,000 -21,000 cash budget 1,02,000 79,600 78,700 d. budgeted income statemnet November December Sale 320000 340000 cogs -208000 -221000 expenses -21000 -21000 depriciation -16000 -16000 Net income 75000 82000
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