Weller Industrial Gas Corporation supplies acetylene and other compressed gases

Question

Weller Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow: Sales are budgeted at $350,000 for November, $370,000 for December, and $360,000 for January. Collections are expected to be 80% in the month of sale and 20% in the month following the sale. The cost of goods sold is 69% of sales. The company desires an ending merchandise inventory equal to 70% 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 $22,300. Monthly depreciation is $22,100. Ignore taxes. Balance Sheet October 31 Assets Cash $ 23,100 Accounts receivable 84,100 Merchandise inventory 169,050 Property, plant and equipment (net of $605,000 accumulated depreciation) 1,015,000 Total assets $ 1,291,250 Liabilities and Stockholders' Equity Accounts payable $ 197,100 Common stock 950,000 Retained earnings 144,150 Total liabilities and stockholders' equity $ 1,291,250

b. Prepare a Merchandise Purchases Budget for November and December.

Explanation / Answer

b. Prepare a Merchandise Purchases Budget for November and December.

November December Sales 350000 370000 Cost of goods sold 241500 255300 Add: Desired ending inventory 178710 173880 Total 420210 429180 Less: Beginning inventory -169050 -178710 Budgeted purchase 251160 250470

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