Required: 1. Calculate the expected cash collections for April, May, and June. 2

Question

Required:

1. Calculate the expected cash collections for April, May, and June.

2. Calculate the budgeted merchandise purchases for April, May, and June.

3. Calculate the expected cash disbursements for merchandise purchases for April, May, and June.

4. Prepare a budgeted balance sheet at June 30th. (Hint: You need to calculate the cash paid for selling and administrative expenses during April, May, and June to determine the cash balance in your June 30th balance sheet.)

Deacon Company is a merchandising company that is preparing a budget for the three-month period ended June 30th. The following information is available Deacon Company Balance Sheet March 31 Assets Cash Accounts receivable Inventory Buildings and equipment, net of depreciation Total assets $ 73,000 44,400 61,600 183,000 $ 362,000 Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings $ 153,500 70,000 138,500 $ 362,000 Total liabilities and stockholders' equity Budgeted Income Statements June 202,000 121,200 80,800 ril May $172,000 182,000 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income 109,200 103,200 68,800 72,800 21,600 23,10026,100 $ 47,200 49,700 54,700 Budgeting Assumptions: a, 60% of sales are cash sales and 40% of sales are credit sales. Twenty percent of all credit sales are collected in the month of sale and the remaining 80% are collected in the month b. Budgeted sales for July are $212,000 subsequent to the sale c, 10% of merchandise inventory purchases are paid in cash at the time of the purchase. The remaining 90% of purchases are credit purchases. All purchases on credit are paid in the month subsequent to the purchase d. Each month's ending merchandise inventory should equal $10,000 plus 50% of the next month's cost of goods sold. e. Depreciation expense is $1,950 per month. All other selling and administrative expenses are paid in full in the month the expense is incurred.

Explanation / Answer

Answer 1

Answer 2

Answer 3

Expected Cash Disbursement for Purchase:

Answer 4

Workings:

Cash summary for period april to june:

April May June Total Sales          1,72,000          1,82,000          2,02,000          5,56,000 Cash Sales (A)          1,03,200          1,09,200          1,21,200          3,33,600 Credit Sales             68,800             72,800             80,800          2,22,400 Collections of Credit Sales: - From Current month Sales (20%)             13,760             14,560             16,160             44,480 - From Previous month Sales (80%)             44,400             55,040             58,240          1,57,680 Total Collections form credit sales (B)             58,160             69,600             74,400          2,02,160 Total Cash Collections from sales(A)+(B)          1,61,360          1,78,800          1,95,600          5,35,760

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