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 $300,000 for November. $320,000 for December, and $310,000 for January. Collections are expected to be 75% in the month of sale. 22% in the month following the sale, and 3% uncollectible. The cost of goods sold is 76% 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 $20,400. Monthly depreciation is $15,400. Ignore taxes. Prepare a Schedule of Expected Cash Collections for November and December. Prepare a merchandise Purchases Budget for November and december. Prepare cash budgets for November and December. Prepare a Budgeted Balance Sheet for the end of December. Prepare Budgeted Income Statements for November and December.

Explanation / Answer

Schedule of cash collection Nov dec Sales 300,000 320,000 schedule of cash collections Accounts receivable 81,400 0 november sales 225000 66000 December sales 0 240000 total cash collections 306400 306000 Merchandise purchase budget budgeted cost of goods sold 228000 243200 add:closing 194560 188480 total needs 422560 431680 less:opening -182400 -194560 required purchase 240160 237120 Cash Budget november december Cash disbursement for purc 198,400 240,160 other monthly cash expense 20,400 20,400 total cash disbursement 218,800 260,560 cash balance beginning 21,400 109,000 Add cash receipts 306,400 306,000 total cash available 327,800 415,000 less cash disbursement 218,800 260,560 exess(def) 109,000 154,440 financing 0 cash balance ending 109,000 154,440 income statement sales 300,000 320,000 cost of goods sold 228,000 243,200 Gross margin 72,000 76,800 Bad debts expense 9,000 9,600 depreciation 15,400 15,400 other expense 20,400 20,400 Net income 27,200 31,400 Bugeted balance sheet cash 154,440 Accounts receivable 70,400 inventoru 188,480 PP&E 1,139,200 total assets 1,552,520 liabilities and stockholder equity accounts payable 237,120 common stock 770,000 Retained earnings 545,400 total 1,552,520

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