Question

Minden Company is a wholesale distributor of premium European chocolates. The company's balance sheet as of April 30 is given below: Minden Company Balance Sheet April 30 Assets Cash Accounts receivable Inventory Buildings and equipment, net of depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Note payable Common stock Retained earnings Total liabilities and stockholders' equity $ 18,700 70,250 41,250 230,000 $ 360,200 $ 72,250 13,700 180,000 94,250 $ 360,200 The company is in the process of preparing a budget for May and has assembled the following data: a. Sales are budgeted at $214,000 for May. Of these sales, $64,200 will be for cash; the remainder will be credit sales. One-half of a month's credit sales are collected in the month the sales are made, and the remainder is collected in the following month. All of the April 30 accounts receivable will be collected in May. b. Purchases of inventory are expected to total $122,000 during May. These purchases will all be on account. Forty percent of all purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the April 30 accounts payable to suppliers will be paid during May. c. The May 31 inventory balance is budgeted at $47,500. d. Selling and administrative expenses for May are budgeted at $85,500, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,050 for the month. e. The note payable on the April 30 balance sheet will be paid during May, with $390 in interest. (All of the interest relates to May.) f. New refrigerating equipment costing $16,300 will be purchased for cash during May. g. During May, the company will borrow $24,500 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.

Answer 1

1)	Calculate the expected cash collections from customers for May :
	Schedule of Expected Cash Collections
	Cash sales - may	$ 64,200
	Collections on account receivable
	April 30 balance	$ 70,250
	May sales {(214,000-64,200)*50%}	$ 74,900
	Total cash receipts	$ 209,350
2)	Calculate the expected cash Disbursements for merchandise purchase for May :
	Schedule of Expected Cash Disbursements
	April 30 Accounts payable balance	$ 72,250
	May purchase ($122,000 *40%)	$ 48,800
	Total cash payments	$ 121,050

3)Cash Budget for May :
Minden Company
Cash Budget
For the month of May
Beginning cash balance	$ 18,700
Add: Collections from customers (see Required 1 )	$ 209,350
Total cash available	$ 228,050
Less: Cash disbursements :
Purchase of inventory (see required 2)	$ 121,050
selling and administrative expenses	$ 85,500
purchase of equipment	$ 16,300
Total cash disbursements	$ 222,850
Excess of cash available over disbursements(228050 -222,850)	$ 5200
Financing :
Borrowing -note	$ 24,500
repayments-note	($13,700)
interest	($ 390)
Total financing	$ 10,410
Ending cash balance ($ 5,200 + $ 10,410 )	$ 15,610

4) Budgeted income statement for May :
Minden Company
Income statement
For the month of May
Sales		$ 214,000
less: cost of goods sold :
Beginning inventory	$ 41,250
Purchases	$ 122,000
Goods available for sale	$ 163,250
less: Ending inventory	($47,500)
Cost of goods sold		($115,750)
Gross margin		$ 98,250
less: Selling and administration expenses (85,500+2050)		($87,550)
Net operating income		$ 10,700
less: interest expense		($ 390)
Net income		$ 10,310

5)Budgeted Balance Sheet as of May 31
Minden Company
Balance sheet
as of May 31
ASSETS :
Cash ( see required 3 )	$ 15,610
Accounts receivable {(214,000-64,200)*50%}	$ 74,900
Inventory	$47,500
Buildings and equipment , net of depreciation( 230,000 -2050+16,300)	$ 244,250
Total assets	$ 382,260
LIABILITIES AND STOCKHOLDERS EQUITY
Accounts payable ($ 122,000 *60% )	$ 73,200
Note payable	$ 24,500
Common stock	$ 180,000
Retained earnings ($ 94,250 + $ 10,310 )	$ 104,560
Total liabilities and stockholders equity	$ 382,260