Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

ABC is a retailer. Its f ollowing balance sheet as of March 31 accountants are preparing the company's 2nd quarter master budget. The company has

ABC is a retailer. Its following balance sheet as of March 31

accountants are preparing the company's 2nd quarter master budget. The company has the follwing balance sheet.

image text in transcribed
ABC accountants have made the following estimates:
  1. Sales for April, May, June, and July will be $220,000, $240,000, $230,000, and $250,000, respectively.
  2. All sales are on credit. Each month's credit sales are collected 35% in the month of sale and 65% in the month following the sale. All of the accounts receivable at March 31 will be collected in April.
  3. Each month's ending inventory must equal 25% of next month's cost of goods sold. The cost of goods sold is 75% of sales. The company pays fol 40% of its merchandise purchases in the month of the purchase and the remaining 60% in the month following the purchase. All of the accounts payable at March 31 are related to previous merchandise purchases and will be paid in April.
  4. Monthly selling and administrative expenses are always $40,000. Each month $6,000 of this total amount is depreciation expense and the remaining $34.000 is spent for expenses that are paid in the month they are incurred
  5. The company will not borrow money or pay or declare dividends during the 2nd quarter. The company will not issue any common stock o repurchase its own stock during the 2nd quarter.

1-How much is the company's expected cash collections in the month of May?

$156000

$227000

$84000

$143000

2-How much is the company's expected cash disbursement for merchandise in the month of April?

$139500

$101250

$67500

$72000

3-How much is the company's expected merchandise purchases in the month of June?

$176250

$168750

$219375

$178125

4-How much is the company's expected Accounts Receivable balance on June 30?

$159500

$236500

$156000

$80500

Balance Sheet March 31 Assets Cash Accounts receivable Inventory Plant and equipment, net of depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Common stock $72,000 Retained earnings 345,000 Total liabilities and stockholders' equity $467,25050,250

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing For Managers The Ultimate Risk Management Tool

Authors: K. H. Spencer Pickett, Jennifer M. Pickett

1st Edition

0470090987, 978-0470090985

More Books

Students also viewed these Accounting questions

Question

to encourage a drive for change by developing new ideas;

Answered: 1 week ago

Question

4 What are the alternatives to the competences approach?

Answered: 1 week ago