PROBLEM 8-19 Cash Budget: Income Statement; Balance Sheet L08-2g, L08-4g LO8-80,

Question

PROBLEM 8-19 Cash Budget: Income Statement; Balance Sheet L08-2g, L08-4g LO8-80,LO8-9, LO8-10 Minden Company is a wholesale distributor of premium European chocolates. The company's balance sheet as of April 30 is given below Balance Sheet April 30 Assets S 9,000 54,000 30,000 Accounts receivable Inventory Buildings and equipment, net of depreciation _207,000 Total assets Liabilities and Stockholders' Equity Accounts payable Note payable Common stock Retained earnings Total liabilities and stockholders' equity $300.,000 S300,000 S 63,000 14,500 180,000 42,500 The company is in the process of preparing a budget for May and has assembled the following data: a. Sales are budgeted at $200,000 for May. Of these sales, $60,000 will be for cash; the remainder will be credit sales. One-half of a month's credit sales are collected in the month the sales are made, and the remainder is collected in the following month. All of the April 30 accounts receivable will be collected in May b. Purchases of inventory are expected to total $120,o00 during May. These purchases will all be on account. Forty percent of all purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the April 30 accounts payable to suppliers will be paid during May. c. The May 31 inventory balance is budgeted at $40,000. d. Selling and administrative expenses for May are budgeted at $72,0oo, exclusive of depreciation. These expenses e. The note payable on the April 30 balance sheet will be paid during May, with $100 in interest. (All of the interest f. New refrigerating equipment costing $6,500 will be purchased for cash during May. will be paid in cash. Depreciation is budgeted at $2,oo0 for the month. relates to May.) g. During May, the company will borrOw $20,00o from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year Required 1. Calculate the expected cash collections for May 2. Calculate the expected cash disbursements for merchandise purchases for May 3. Prepare a cash budget for May 4. Using Schedule 9@ as your guide, prepare a budgeted income statement for May 5. Prepare a budgeted balance sheet as of May 31.

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1. Expected Cash Collections May Collection against opening Receivable 54000 Cash Sale 60000 Credit Sale-Received in May (200000-60000)/2 70000 Collection against June Sale 0 Total Cash Collection 0 184000 0 2. Expected Cash Disbursment May Payment against opening payable 63000 Paid in same month 120000*40% 48000 Toal Cash disbursment for Pur 111000 3. Cash Budget May Beginning Cash Balance 9000 Add receipts: -Collection from Customers (From-1) 184000 Total Cash Available 193000 Less: Cash Disbursment -Merchandise Purchase 111000 -Selling and Admin 72000 -Note payable 14500 -Interest 100 -Equipment Purchase 6500 Total Cash Disbursment 204100 Excess/(Deficiency) of cash -11100 Financing: -Borrowing 20000 -Repayment -Interest Total Financing 20000 Ending Cash Balance 8900 4. Budgeted Income Statement Sales Revenue 200000 Less: Cost of Goods Sold -Opening 30000 add: Purchase 120000 Cost of goods available for sale 150000 Less: Closing inventory 40000 Cost of Goods Sold 110000 Gross Margin 90000 Less: Expense -Selling and Admin 72000 -Depreciation 2000 Total Expense 74000 Net Operating Income 16000 Less: Interest 100 Net Income 15900 5. Budgeted Balance Sheet Cash 8900 Accounts Receivable 70000 200000 Sale-60000 cash=140000, half of the same is receivable Inventory 40000 Given Building and Equipment 211500 207000 opening+6500 pur-2000 dep Total Assets 330400 Accounts Payable 72000 120000*60% Note Payable (14500-14500+20000) 20000 Common Stock 180000 Retained Earning (42500+15900) 58400 Total Liabi and equity 330400

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