Question

Weller Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow:

• Sales are budgeted at $360,000 for November, $380,000 for December, and $370,000 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 70% of sales.
• The company desires an ending merchandise inventory equal to 85% 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 $20,000.
• Monthly depreciation is $19,800.
• Ignore taxes.

Balance Sheet October 31
Assets
Cash	$	20,800
Accounts receivable		81,800
Merchandise inventory		214,200
Property, plant and equipment (net of $584,000 accumulated depreciation)		994,000
Total assets	$	1,310,800
Liabilities and Stockholders' Equity
Accounts payable	$	194,800
Common stock		490,000
Retained earnings		626,000
Total liabilities and stockholders' equity	$	1,310,800

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.

Answer 1

Weller Industrial Gas Corporation Schedule of Expected Cash Collections For the Months October November December Totals November December. Totals 81800 81800 270000 90000 360000 285000 285000 351800 375000 726800 Merchandise Purchases Budget For the Months COGS Closing Invent. November December. Totals 252000 266000 518000 226100 220150220150 478100 486150 738150 -214200 -226100 -214200 263900 260050 523950 Begin. Invent. Purchase Cash Budget For the Months Opening Balance Collections Cash Available November December. Totals 20800 157800 20800 351800 375000 726800 372600 532800 747600 Purchase Payments Expenses Total Payments Excess Cash 194800 20000 214800 157800 263900 458700 20000 40000 283900 498700 248900248900 740000 Income Statement For the Month ending December Sales Less: COGS Opening Stock Purchases Closing Stock Gross Profit Expenses Depreciation Net Income 214200 523950 -220150 518000 222000 40000 39600 79600 142400 Budgeted Balance Sheet As at December 31 Assets Cash Accounts receivable Merchandise inventory Property, plant and equipment Total assets 248900 95000 220150 954400 1518450 Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings Total liabilities and stockholders' equity 260050 490000 768400 1518450