Wheeling Company is a merchandiser that provided a balance sheet as of September

Question

Wheeling Company is a merchandiser that provided a balance sheet as of September 30 as shown below: Wheeling Company Balance Sheet September 30 Assets Cash Accounts receivable Inventory Buildings and equipment, net of depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings Total liabilities and stockholders' equity $ 70,400 126,000 56,700 267,000 $ 520,100 $ 173,600 216,000 130,500 $ 520,100 The company is in the process of preparing a budget for October and has assembled the following data: 1. Sales are budgeted at $420,000 for October and $430,000 for November. Of these sales, 35% will be for cash; the remainder will be credit sales. Forty percent of a month's credit sales are collected in the month the sales are made, and the remaining 60% is collected in the following month. All of the September 30 accounts receivable will be collected in October. 2. The budgeted cost of goods sold is always 45% of sales and the ending merchandise inventory is always 30% of the following month's cost of goods sold.

Explanation / Answer

1 Shedule of expected cash collection Particulars October $ Cash Sales             147,000 Collection from September Sales             126,000 Collection from October Sales             109,200 Total Cash Collection             382,200 2 Merchendise Purchase Budget Particulars October $ Merchendise Purchase Budget Enidng Inventory                58,050 Add : COGS             189,000 Less : Begning Inventory                56,700 Total Purchases             190,350 Enidng Inventory October $ Cost of goods sold for next month             193,500 (30% of COGS)                58,050 3 Cash Disbursement Particulars October $ Cash Disbursement For September Purchase             173,600 For October Purchase                57,105 Total Cash Disbursement             230,705 4 Budgeted Income Statement Particulars October $ Sales             420,000 Cost of Goods sold(420000*45%)             189,000 Gross Margin             231,000 Selling And Administrative                89,600 Depreciation                  2,670 Net Operating Income             138,730 5 Budgeted Balancesheet Assets Novmber $ Cash             132,295 Accounts Receivable             163,800 Inventory                58,050 Building and equipment(Net depreciation)             264,330 Total Assets             618,475 Liability and stock holders equity Accounts Payable             133,245 Common Stock             216,000 Retained Earnings             269,230 Total Liability and stock holders equity             618,475                           -

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