P8-27 Help Save &ExitSubmi; Check my work Deacon Company is a merchandising comp
ID: 2517942 • Letter: P
Question
P8-27 Help Save &ExitSubmi; Check my work Deacon Company is a merchandising company that is preparing a budget for the three-month period ended June 30n. The folowing information is available 20 20 Deacon Company Balance Sheet Accounts receivable Inventory Buildings and equipment, net of depreelation1 000 Total assets S55.400 41,200 53,200 329,8e0 Liabilities and Stockhelders quity 0.000 Retained earnings Totai liabilities and stoekholders equity 39.0 April Nay 144 000 $154,00074,000 Cost of goods sold Ret operating inoome 37,300 39,80044,00 Budgeting Assumptions 60% of sales are cash sales and 40% of sales are credit sales Twenty percent of am credit sales are collected in the month of saleExplanation / Answer
Working Notes for calculation of cash:
Total Cash 79700
*Credit sales = 40% of 174000 = 69600
Credit sales receivable of same month = 20% of 69600= 13920
** Credit sale of May = 40% of 154000= 61600
Credit sales receivables for the month of May = 80% of 61600 = 49280
*** Purchases for the month of June = Openning inventory+ Cost of goods sold - Closing inventory
= 62200 + 104400 - 65200 = 101400
Credit Purchases = 90% of 101400 and Cash Purchases = 10% of 101400
where openning inventory for june is the same as closing inventory for May
****Credit purchases of May = 90% of 86400= 77760
Purchases = Openning inventory + Cost of goods sold - closing inventory
56200 + 92400 - 62200 = 86400
openning stock of may is the closing stock of April calculated based on the above formula
closing stock is given in the question as 10000 + 50% of cost of goods sold
Building and Equipment
depriciation given as 1750 per month
Value of asset in March = 100000
value of asset in April = 100000 - 1750 = 98250
value of asset in May = 98250 - 1750 = 96500
value of asset in june = 96500-1750 = 94750
Retained Earning:
RE = RE of previous period - deprication expenses + net income
RE for April = 116300 - 1750 + 37300 = 151850
RE for May = 151850 - 1750 + 39800 = 189900
RE for June = 189900 - 1750 + 44800 = 232950
Particulars Amount Cash Sales( 60% of 174000) 104400 Credit sales receivable in the same month* 13920 Credit sales receivable of the previous month ** 49280 Cash paid for purchases of current month*** (10140) Cash paid for the purchases of previous month**** (77760)Related Questions
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