Welnor Industrial Gas Corporation supplies acetylene and other compressed gases

Question

Welnor Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow: o Sales are budgeted at $320,000 for November, S340,000 for December, and S330,000 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 ending merchandise inventory to equal 80% of the following month's cost of goods sold. Payment for merchandise is made in the month following the purchase o Other monthly expenses to be paid in cash are $21,000. o Monthly depreciation is $16,000. o Ignore taxes. Statement of Financial Position October 31 Assets Cash Accounts receivable (net of allowance for uncollectible accounts) Merchandise inventory Property, plant and equipment (net of $658,000 accumulated depreciation) Total assets $22,000 82,000 166,400 $1,440,400 Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings Total liabilities and stockholders' equity $199,000 840,000 $1440,400 Required: a. Prepare a Schedule of Expected Cash Collections for November and December. b. Prepare a Merchandise Purchases Budget for November and December. c. Prepare Cash Budgets for November and December. d. Prepare Budgeted Income Statements for November and December e. Prepare a Budgeted Balance Sheet for the end of December. HTHL CSS

Explanation / Answer

1 Shedule of expected cash collection Particulars Novermber $ December $ Collection from October Sales                82,000 Collection from November Sales             240,000                64,000 Collection from December Sales             255,000 Total Cash Collection             322,000             319,000 2 Merchendise Purchase Budget Particulars Novermber $ December $ Merchendise Purchase Budget Enidng Inventory             176,800             171,600 Add : Sales             320,000             340,000 Less : Begning Inventory             166,400             176,800 Total Purchases             330,400             334,800 Enidng Inventory Novermber $ December $ Cost of goods sold for next month             221,000             214,500 (80% of COGS)             176,800             171,600 3 Cash Budget Particulars Novermber $ December $ Cash Receipt             322,000             319,000 Cash Disbursement Cash Disbursement for merchendise             363,200             330,400 Other Monthly Expenses                21,000                21,000 Total Cash Disbursement             384,200             351,400 Excess (deficiency ) of cash available over disbursements             (62,200)             (32,400) October Purchase Ending Inventory             166,400 Slaes of October(82000/20%)             410,000 Begning Inventory(410000*65%)*80%             213,200 Purchase october             363,200 4 Budgeted Income Statement Particulars Novermber $ December $ Sales             320,000             340,000 Bad debts expenses                16,000                17,000 Cost of Goods sold             208,000             221,000 Gross Margin                96,000             102,000 Other Monthly Expenses                21,000                21,000 Depreciation                16,000                16,000 Net Operating Income                59,000                65,000 5 Budgeted Balancesheet Assets December $ Cash             322,600 Accounts Receivable (Net of allowance for uncollectble accounts)                68,000 Inventory             171,600 Property Palnt and equipment(Net of $690000 accumulated depreciation)          1,138,000 Total Assets          1,700,200 Liability and stock holders equity Accounts Payable             334,800 Common Stock             840,000 Retained Earnings             525,400 Total Liability and stock holders equity          1,700,200                         -

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