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: Sales are budgeted at $350,000 for November, $370,000 for December, and $360,000 for January . Collections are expected to be 75% in the month of sale, 20% in the month following the sale, and 5% uncollectible. The cost of goods sold is 78% of sales The company desires an ending merchandise inventory equal to 80% of the cost of goods sold in the following month. Payment for merchandise is made in the month following the purchase Other monthly expenses to be paid in cash are $20,200. Monthly depreciation is $15,200. . Ignore taxes Balance Sheet October 31 Assets Cash Accounts receivable (net of allowance for uncollectible accounts) Merchandise Inventory Property, plant and equipment (net of $652,000 accumulated depreciation) $ 21,200 81,200 218,400 1,170,000 lotal assets $1,490,800 Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings $ 198,200 750,000 542,600 Total liabilities and stockholders' equity $1,490,800

Explanation / Answer

Required Budgets are as prepared below:

Weldon Industrial gas Corporation Schedule of expected Cash collections Month Particulars November December January Sales 350,000 370,000 360,000 Schedule of expected Cash collections Account Receivable 81,200 November sales 262,500 70,000 December sales 277,500 74,000 january sales 270000 Total collections 343,700 347,500 344,000 Weldon Industrial gas Corporation Merchandise Purchase Budget Month Particulars November December January Cost of Goods sold (78% of sales) 273,000 288,600 280,800 Add: Ending Inventory (80% of nect month COGS) 230,880 224,640 0 Total needs 503,880 513,240 280,800 Less: Beginning Inventory 218,400 230,880 224,640 Required Purchase 285,480 282,360 Weldon Industrial gas Corporation Schedule of expected Cash payments Month Particulars November December January Beginning Accounts Payable (a) $198,200 November Purchases $285,480 December Purchases $282,360 Total payments $198,200 $285,480 $282,360 Weldon Industrial gas Corporation Cash Budget Month Particulars November December January Cash disbursement for merchandise 198,200 285,480 282,360 Other monthly cash expense $20,200 $20,200 $20,200 Total cash disbursement $218,400 $305,680 $302,560 Cash balance, beginning 21,200 146,500 21,200 Add: cash receipts $343,700 $347,500 $344,000 Total cash available 364,900 494,000 365,200 Less cash disbursement 218,400 305,680 302,560 Excess (deficiency) of cash available over disbursements 146,500 188,320 62,640 financing 0 0 0 cash balance ending 146,500 188,320 62,640 Weldon Industrial gas Corporation Budgeted Income Statement Particulars November December Sales 350,000 370,000 Less: Cost of goods sold (78% of sales) 273,000 288,600 Gross margin 77,000 81,400 Less: Selling and administartive exp Depreciation 15,200 15,200 Other monthly expenses 20,200 20,200 Bad Debt Expense (5%) 17,500 18,500 Net Income 24,100 27,500 Weldon Industrial gas Corporation Budgeted balance Sheet Dec-31 Assets Cash 188,320 Accounts Receivable (net of allowance) 74,000 Merchandise Inventory 224,640 Property and equipment Net of accumulated dep 1,139,600 Total assets 1,626,560 Liabilities and Stockholders' Equity Accounts Payable purchases 282,360 Common Stock 750,000 Retained earnings (542,600+24,100+ 27,500) 594,200 Total liabilities and stockholders' equity 1,626,560

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