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 9,100 77,250 40,000 239,000 365,350 Accounts receivable Inventory Buildings and equipment, net of depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Note payable 79,750 12,300 180,000 Common stock Retained earnings 93,300 Total liabilities and stockholders' equity 365,350 The company is in the process of preparing a budget for May and has assembled the following data: a. Sales are budgeted at $266,000 for May. Of these sales, $79,800 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 $170,000 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 $44,500 d. Selling and administrative expenses for May are budgeted at $81,900, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $6,450 for the month. e. The note payable on the April 30 balance sheet will be paid during May, with $140 in interest. (All of the interest relates to May.) f. New refrigerating equipment costing $9,600 will be purchased for cash during May. g. During May, the company will borrow $23,400 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	Minden company
	Cash collection for the month of May
	Cash sales-May	$79800
	Collection on accounts receivable:
	30 April balance	$77250
	May sales	$93100
	Total Cash Collections	$250150
	Credit sales - 266000-79800 = $186200
	Cash collected = 186200*50% = $93100
2	Minden company
	Cash Disbursement for the month of May
	Purchase in May	$68000
	Account payable on 30 April	$79750
	Total cash disbursement	$147750
	May purchase payment
	170000*40%
	$68000
3	Minden Company
	cash Budget
	For the month of May
	Beginning Cash Balance	$9100
	Add: collection from customer	$250150
	Total cash Available	$259250
	less: cash disbursement
	purchase of inventory	$147750
	selling and administrative expenses	$81900
	purchases of equipment	$9600
	total cash disbursement	$239250
	Excess of cash available over disbursements	$20000
	Financing:
	Borrowing - note	$23400
	Repayment -note	($12300)
	Interest	($140)
	Total Financing	$10960
	Ending Cash balance	$30960
4	Minden Company
	Budgeted Balance sheet
	For the month of May
	Sales		$266000
	Cost of goods sold:
	Beginning inventory	$40000
	Add: purchase	$170000
	Less: ending inventory	$44500
	Cost of goods sold		$165500
	Gross margin		$100500
	Less:Selling and administrative expense		$88350
	net operating income		$12150
	Less:Interest		$140
	Net income		$12010
5	Minden Company
	Budgeted Balance sheet
	May-31
	Assets
	cash	$30960
	Account receivable	$93100
	Inventory	$44500
	Building and equipment less depreciation	$242150	(239000+9600-6450)
	Total assets	$410710
	Liabilities and stockholders equity
	Account payable	$102000	(170000*60%)
	Notes Payable	$23400
	Common stock	$180000
	Retained earnings	$105310	(93300+12010)
	Total Liabilities and stockholders equity	$410710