Deacon Company is a merchandising company that is preparing a budget for the three month period ended June 30th The following information is available Deacon Company Balance Sheet March 31 Assets Cash $ 68,800 Accounts receivable 34,000 Inventory 64,600 Buildings and equipment, net of depreciation 122,000 Total assets $ 289,400 Liabilities and Stockholders Equity Accounts payable $ 96,500 Common stock 70,000 Retained earnings 122,900 Total liabilities and stockholders equity $ 289,400 Budgeted Income Statements April May June Sales $ 182,000 $ 192,000 $ 212,000 Cost of goods sold 109,200 115,200 127,200 Gross margin 72,800 76,800 84,800 Selling and administrative expenses 18,800 20,300 23,300 Net operating income $ 54,000 $ 56,500 $ 61,500 Budgeting Assumptions 60 of sales are cash sales and 40 of sales are credit sales Twenty percent of all credit sales are collected in the month of sale and the remaining 80 are collected in the month subsequent to the sale Budgeted sales for July are $222,000 10 of merchandise inventory purchases are paid in cash at the time of the purchase The remaining 90 of purchases are credit purchases All purchases on credit are paid in the month subsequent to the purchase The accounts payable at March 31 will be paid in April Each months ending merchandise inventory should equal $10,000 plus 50 of the next months cost of goods sold Depreciation expense is $1,300 per month All other selling and administrative expenses are paid in full in the month the expense is incurred Required 1 Calculate the expected cash collections for April, May, and June 2 Calculate the budgeted merchandise purchases for April, May, and June 3 Calculate the expected cash disbursements for merchandise purchases for April, May, and June 4 Prepare a budgeted balance sheet at June 30th (Hint You need to calculate the cash paid for selling and administrative expenses during April, May, and June to determine the cash balance in your June 30th balance sheet )

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 13, 2024

Deacon Company is a merchandising company that is preparing a budget for the three-month period ended June 30th. The following information is available Deacon Company

Deacon Company is a merchandising company that is preparing a budget for the three-month period ended June 30th. The following information is available

Deacon Company Balance Sheet March 31
Assets
Cash	$	68,800
Accounts receivable		34,000
Inventory		64,600
Buildings and equipment, net of depreciation		122,000
Total assets	$	289,400
Liabilities and Stockholders Equity
Accounts payable	$	96,500
Common stock		70,000
Retained earnings		122,900
Total liabilities and stockholders equity	$	289,400

Budgeted Income Statements
	April		May		June
Sales	$	182,000	$	192,000	$	212,000
Cost of goods sold		109,200		115,200		127,200
Gross margin		72,800		76,800		84,800
Selling and administrative expenses		18,800		20,300		23,300
Net operating income	$	54,000	$	56,500	$	61,500

Budgeting Assumptions:

60% of sales are cash sales and 40% of sales are credit sales. Twenty percent of all credit sales are collected in the month of sale and the remaining 80% are collected in the month subsequent to the sale.
Budgeted sales for July are $222,000.
10% of merchandise inventory purchases are paid in cash at the time of the purchase. The remaining 90% of purchases are credit purchases. All purchases on credit are paid in the month subsequent to the purchase. The accounts payable at March 31 will be paid in April.
Each months ending merchandise inventory should equal $10,000 plus 50% of the next months cost of goods sold.
Depreciation expense is $1,300 per month. All other selling and administrative expenses are paid in full in the month the expense is incurred.

Required:

1. Calculate the expected cash collections for April, May, and June.

2. Calculate the budgeted merchandise purchases for April, May, and June.

3. Calculate the expected cash disbursements for merchandise purchases for April, May, and June.

4. Prepare a budgeted balance sheet at June 30th. (Hint: You need to calculate the cash paid for selling and administrative expenses during April, May, and June to determine the cash balance in your June 30th balance sheet.)