sheet as of April 30 is given below is given below: ance Sheot $ 12,700 66,500 4

Question

sheet as of April 30 is given below is given below: ance Sheot $ 12,700 66,500 48,500 229,000 $ 356,700 Liabilities and S 67,500 19,100 180,000 90,100 Note payable Retained eamings s 356,700 The company is in the process of preparing a budget for May and has assembled the folowing data: a. Sales are budgeted at $262,000 for May. Of these sales, $78,600 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 Purchases of inventory are expected to total $196,000 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 b. c. The May 31 d. Selling and administrative expenses for May are budgeted at $87,300, exclusive of depreciation. These e. The note payable on the April 30 balance sheet will be paid during May, with $550 in interest. (All of the f. New refrigerating equipment costing $13,000 will be purchased for cash during May. expenses will be paid in cash. Depreciation is budgeted at $6,400 for the month interest relates to May.) During May, the company will $28,900 from its bank by giving a new note payable to the bank for g.

Explanation / Answer

1a. Modern Company Schedule of expected cash collection Cash Sales-May $78,600 Collection on accounts receivable: April 30 Balance $66,500 May Sales $170,300 78600+0.5*(262000-78600) Total Cash received $236,800 Modern Company Schedule of expected cash disbursement April 30 accounts payable balance $67,500 May purchases $          78,400 (0.4*196000) Total cash payment $145,900 1b Modern Company Cash budget For the month of May Beginning cash balance $12,700 Add: collection from customers $236,800 Total cash available $249,500 Less Cash disbursement: purchase of inventory $145,900 Selling and administrative expense $87,300 purchase of equipment $13,000 Total cash disbursement $246,200 Excess of cash available over disbursement $3,300 Financing; Borrowing note $28,900 repaying note ($19,100) interest ($550) Total financing $9,250 Ending cash balance $12,550 2 Modern Company Budgeted Income statement For the month of May Sales $262,000 Cost of goods sold: Beginning inventory $48,500 Add:Purchase $196,000 Less:Ending inventory $84,000 Cost of goods sold $160,500 Gross Profit $101,500 Selling & administrative expenses $87,300 Depreciation expense $6,400 Operating profit before interest and taxes $7,800 Interest expense $550 Net Operating Income $7,250 3 Modern Company Budgeted Balance Shhet As on May 31 ASSETS: Cash $12,550 Accounts Receivable $          91,700 0.5*(262000-78600) Inventory $84,000 Building & equipment, net of depreciation $        235,600 (229000-6400+13000) Total Assets $423,850 Liabilities & shareholders equities LIABILITIES: Accounts payable $        117,600 (196000*0.6) Notes payable $28,900 Total Liabilities $        146,500 Shareholders Equity: Common Stock $180,000 Retained earning 97350 (90100+7250) Total Shareholders equity $277,350 Total liabilities and shareholders equity $        423,850

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