2. (12 points) Weldon Indus compressed gases to industry. Data regarding the s t

Question

2. (12 points) Weldon Indus compressed gases to industry. Data regarding the s trial Gas Corporation supplies acetylene and other tore's operations follow: The company sells each unit for $45. Budgeted Sales . October November December January 30,000 Month 40,000 Sales in Units 30,000 25,000 Collections are expected to be 70% in the month of sale, 30% in the month following the sale. The A/R balance at September 30th will be collected in full in October. . . The cost of the merchandise is $32 per unit. .In addition to meeting the current month's sales demand, management wants to maintain and ending inventory balance of 10% of the next month's sales. The ending inventory balance at September 30th is 2,625 units. Payment for merchandise is made as follows: ½ paid in the month of the purchase, ½ paid the month following the purchase. .The A/P balance at September 30th will be paid in full in October. Other monthly expenses to be paid in cash are $300,000. Balance Sheet September 30 Assets . 16,000 250,000 84,000 Ca Inventory. Property, plant and equipment (net of $500,000 accumulated depreciation 980,400 $1,330,400 Liabilities and Stockholders' Equity Accounts payable. Common stock Retained earnings. Total liabilities and stockholders' equity S42,000 840,000 448.400 S1330,400 Required a. Prepare a Sales Budget for October, November and December. b. Prepare a Schedule of Expected Cash Collections for October, November and c. Prepare a Merchandise Purchases Budget for October, November and d. Prepare a Schedule of Expected Cash Disbursements for October, November e. Prepare Cash Budgets for October, November and December. December December and December.

Explanation / Answer

Requirement a: Sales Budget: October November December Units 30000 25000 40000 Selling Price per unit 45 45 45 Sales (Units *Selling Price) 1350000 1125000 1800000 Requirement b: Schedule of Expected Cash Collections: October November December Accounts Receivable payment 250000 70% in the month of sale 945000 787500 1260000 30% in the following month 405000 337500 1195000 1192500 1597500 Requirement c: Merchandise Purchases Budget: October November December Units Sold 30000 25000 40000 Ending Inventory 2500 4000 3000 Less: Beginning Inventory 2625 2500 4000 Purchases 29875 26500 39000 Cost per unit 32 32 32.00 Cost of Merchandise to be purchased 956000 848000 1248000 Requirement d: Schedule of Expected Cash Disbursements October November December Accounts payable cleared 42000 50% in the month of purchase 478000 424000 624000 50% in the following month 478000 424000 520000 902000 1048000 Requirement e: Cash Budget October November December Beginning Cash Balance 16000 391000 381500 Cash Collections 1195000 1192500 1597500 Less: Cash Disbursements 520000 902000 1048000 Less: Cash Expenses 300000 300000 300000 Ending Balance 391000 381500 631000

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