Question

Exercise 8-18 Cash Flows; Budgeted Income Statement and Balance Sheet [LO8-2, L08-3, L08-9, L08- 10] Wolfpack Company is a merchandising company that is preparing a budget for the month of July. It has provided the following information: Wolfpack Company Balance Sheet June 30 Assets Cash Accounts receivable Inventory Buildings and equipment, net of depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings Total liabilities and stockholders' equity 89,00 54,28 48.eee 238,888 $ 422,eee 257.ee $ 422,de Budgeting Assumptions: count. Thise The accesventy per 1. All sales are on account. Thirty percent of the credit sales are collected in the month of sale and the remaining 70% are collected in the month subsequent to the sale. The accounts receivable at June 30 will be collected in July 2. All merchandise purchases are on account. Twenty percent of merchandise inventory purchases are bald in the month of the purchase and the remaining 809 is paid in the month after the purchase the accounts payable at June 30 will be paid in 3. The budgeted Inventory balance at July 3115 $24.500 4. Deprecation expense is $4,600 per month. All other selling and administrative expenses are paid in full in the month the expense is incurred Bu the company cash budget for July shows expected can colections of $901200.expected cash disbursements of merchandise purchases of $44.700, and cash paid for seling and administrative expenses $19.400 Required: Faithe month of Javi calculate the following a. Budgeted sees Brey6 Ne >

Answer 1

1.

a)

Budgeted cash collections	$90,200
(Less): Collections from the accounts receivable at June 30	($54,200)
30% of the credit sales in July	$36,000

Budgeted sales in July = $36,000/30%

= $120,000

b)

Budgeted cash disbursements for merchandise purchases	$44,700
(Less): Payments to accounts payable at June 30	($35,000)
20% of the credit purchases in July	$9,700

Budgeted merchandise purchases = $9,700/20%

= $48,500

c)

Budgeted cost of goods sold = Opening stock + budgeted merchandise purchases - budgeted closing stock

= 48,000+48,500-24,500

= $72,000

d)

Budgeted income statement
For the month of July
Sales A		$120,000
Expenses:
Cost of goods sold	$72,000
Depreciation expense	$4,600
Selling and administrative expenses	$19,400
Total expenses B		$96,000
Net operating income A-B		$24,000

2.

Wolfpack Company
Budgeted Balance Sheet
July 31
Assets
Cash	$115,900
Accounts receivable (120,000 - 36,000)	$84,000
Inventory	$24,500
Buildings and equipment, net of depreciation (230,000-4,600)	$225,400
Total assets	$449,800
Liabilities and stockholder's equity
Accounts payable (48,500-9,700)	$38,800
Common stock	$100,000
Retained earnings (28,7000+24,000)	$311,000
Total liabilities and stockholder's      equity	$449,800

Calculation:

Cash
Beginning	$89,800
Collections	$90,200
Disbursements (44,700+19,400)	($64,100)
Ending Balance	$115,900

.