Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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 $ 73,600
Accounts receivable 39,600
Inventory 66,700
Buildings and equipment, net of depreciation 192,000
Total assets $ 371,900
Liabilities and Stockholders Equity
Accounts payable $ 167,300
Common stock 70,000
Retained earnings 134,600
Total liabilities and stockholders equity $ 371,900

Budgeted Income Statements
April May June
Sales $ 189,000 $ 199,000 $ 219,000
Cost of goods sold 113,400 119,400 131,400
Gross margin 75,600 79,600 87,600
Selling and administrative expenses 19,900 21,400 24,400
Net operating income $ 55,700 $ 58,200 $ 63,200

Budgeting Assumptions:

  1. 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.

  2. Budgeted sales for July are $229,000.

  3. 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.

  4. Each months ending merchandise inventory should equal $10,000 plus 50% of the next months cost of goods sold.

  5. Depreciation expense is $1,650 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.)

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 A Practical Approach

Authors: Robyn Moroney, Fiona Campbell, Jane Hamilton, Valerie Warren

4th Canadian Edition

1119709490, 9781119709497

More Books

Students also viewed these Accounting questions