Balance Sheet

September $30$

Assets

Cash

Accounts receivable $90,000$

Inventory $32,400$

Buildings and equipment, net $of$ depreciation $214,000$

Total assets $$395,400$

Liabilities and Stockholders' Equity

Accounts payable $$73,000$

Common stock $216,000$

Retained earnings $106,400$

Total liabilities and stockholders' equity $$395,400$

Total liabilities and stockholders' equity

The company is in the process of preparing a budget for October and assembled the following data:

Sales are budgeted at $$240,000$ for October and $$250,000$ for November. Of these sales, $35\%$ will be for cash; the remainder will

be credit sales. Forty percent of a month's credit sales are collected in the month the sales are made, and the remaining $60\%$ are

collected in the following month. All of the September $30$ accounts receivable will be collected in October.

The budgeted cost of goods sold is always $45\%$ of sales and the ending merchandise inventory is always $30\%$ of the following

month's cost of goods sold.

All merchandise purchases are on account. Thirty percent of all purchases are paid for in the month of purchase and $70\%$ are paid

for in the following month. All of the September $30$ accounts payable to suppliers will be paid during October.

Selling and administrative expenses for October are budgeted at $$78,000,$ exclusive of depreciation. These expenses will be paid

in cash. Depreciation is budgeted at $$2,000$ for the month.

Required:

Using the information provided, calculate or prepare the following for October:

a$.$ The budgeted cash collections.

b$.$ The budgeted merchandise purchases.

c$.$ The budgeted cash disbursements for merchandise purchases.

d$.$ The budgeted net operating income.

e$.$ An end$-$of$-$month budgeted balance sheet.

Assume the following changes to the underlying budgeting assumptions:

$50\%$ of a month's credit sales are collected in the month the sales are made and the remaining $50\%$ are collected in the following

month

The ending merchandise inventory is always $10\%$ of the following month's cost of goods sold

$20\%$ of all purchases are paid for in the month of purchase and $80\%$ are paid for in the following month.

Using these new assumptions, calculate or prepare the following for October:

a$.$ The budgeted cash collections.

b$.$ The budgeted merchandise purchases.

c$.$ The budgeted cash disbursements for merchandise purchases.

d$.$ Net operating income.

e$.$ An end$-$of$-$month budgeted balance sheet.