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: o Sales are budgeted at $360,000 for November, $380,000 for December, and $350,000 for January. o Collections are expected to be 75% in the month of sale, 20% in the month following the sale, and 5% uncollectible. o The cost of goods sold is 65% of sales. o The company desires an ending merchandise inventory equal to 60% of the cost of goods sold in the following month. o Payment for merchandise is made in the month following the purchase. o Other monthly expenses to be paid in cash are $21,900. o Monthly depreciation is $20,000. Balance Sheet October 31 Assets Cash $ 16,000 Accounts receivable (net of allowance for uncollectible accounts) 74,000 Merchandise inventory 140,400 Property, plant and equipment (net of $500,000 accumulated depreciation) 1,066,000 Total assets $1,296,400 Liabilities and Stockholders' Equity Accounts payable $ 240,000 Common stock 640,000 Retained earnings 416,400 Total liabilities and stockholders' equity $1,296,400 ~ 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 Budgeted Income Statements for November and December. ~ Prepare a Budgeted Balance Sheet for the end of December

Explanation / Answer

Schedule of expected cash collections November December Total Budgeted Sales 360000 380000 740000 Collections: October sales 74000 74000 November Sales 270000 72000 342000 December Sales 285000 285000 Total Collections 344000 357000 701000 Merchandise Purchase Budget November December Total Cost of goods sold (65%) of sales 234000 247000 481000 AdD: Desired ending inventory             (60% of the next month's cost) 148200 136500 136500 Cost of goods needed 382200 383500 617500 Less: Beginning inventory 140400 148200 140400 Budgeted Purchases 241800 235300 477100 Weldon Industrial Gac Corporation Cash Budget for the months of November and December November December Total Beginning cash balance 16000 98100 16000 Add: Collections from customers 344000 357000 701000 Cash available for disbursements 360000 455100 717000 Less: Disbursements:    For merchandise purchases 240000 241800 481800    For operating expenses 21900 21900 43800 Total disbursements 261900 263700 525600 Ending cash balance 98100 191400 191400 Weldon Industrial Gac Corporation Income statement for the year ended December 31 Sales Revenue 740000 Cost of goods sold 481000 Gross profit 259000 Expenses: Operating expenses 43800 Depreciation 40000 Total expenses 83800 Net operating income 175200 Weldon Industrial Gac Corporation Balance Sheet as at December 31 Assets Cash 191400 Acounts Receivable 113000 Merchandise Inventory 136500 Plant and equipment 1566000 Depreciation 540000 1026000 Total Assets 1466900 Liabilities and equity Accounts Payable 235300 Comon stock 640000 Retained earnings Beginning balance 416400 Net income 175200 591600 Total liabilities and equity 1466900

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