Question

Weller Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow: • Sales are budgeted at $300,000 for November, $320,000 for December, and $310,000 for January • Collections are expected to be 75% in the month of sale and 25% in the month following the sale. • The cost of goods sold is 76% 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 $20,600. • Monthly depreciation is $20,400. Ignore taxes. Balance Sheet October 31 Assets Cash Accounts receivable Merchandise inventory Property, plant and equipment (net of $599,000 accumulated depreciation) Total assets $ 21,400 82,400 182,400 1, eee, eee $1,286,200 Liabilities and Stockholders' Equity € DE AD Rekla

can you please tell me how you arrive at the beginning cash balance for November and december. 21,400 and 112,800. thanks for you help.

Answer 1

Explanation

1) If you look at the balance sheet carefully, you will see that , its for the october month end.

2) All the balance sheet accounts are permanent accounts and hence all the balances are roll over for next period.

3) Here, october 31th cash balance is $ 21,400 . Therefore this will become the novermber month's beginning cash balance.

4) Now, when we will add receits and deduct disbursements,we will get the ending balance. And same will become the December's beginning balance.

5) Calculation :

November Beginning Balance ( given)	$ 21,400
Add: Cash Receipt	$ 307,400
Total Cash Available	$ 328,800
Less: Cash Disburement	$ 216,000
November's Ending balance ( Dec. Beging Bal)	$ 112,800

6) Collections are expected 75% in the month of sale.For Nov. sale is $ 300,000. therefore collection would be:

= $ 300,000× 75% = $ 225,000

7) Rest 25% are collected in the next month. Same way, october 's 25 % would be collected in November. therefore account receivable $ 82,400 is also collected in November.

8) Total Receipt of November:

= $ 225,000 + $82,400 ( given)

=$ 307,400

9 ) Cash disbursement is equal to

= $ 195,400 ( account payable, given) + $ 20,600 ( cash exp ,given)

= $ 216,000