Hello,

I had a problem worked out by you guys however, something ended up being wrong in it. Specifically, the cash budget, and consequently the budgeted balance sheet.

Attached is the solution provided by you, the correct cash budget, and the original problem.

I think the problem is in the merchandise purchase budget ("less-beginning merchandise inventory" figures).

Could you help determine what went wrong and how to fix it?

Thanks.

Cash Balance, Beginning Add cash receipts Total cash avilable Less cash disbursements Excess (deficiency) of cash avilable over disbursement Financing Cash Balance, Ending Cash Budget January $16,000 $336,500 $352,500 $263,800 $88,700 $0 $88,700 Calculation- Accounts receivable January sales February sales March Sales April Sales May Sales June Sales Total cash collections Cost of Goods Sold Add-desired ending merchandise inventory Total Needs Less-beginning ending merchandise inventory Required Purchase Cash Disbursements for merchandise Other monthly expenses Total Cash Disbursements Sales Bad debts expense Cost of good sold Gross Margin Other monthly expense Schedule of Expected Cash Collections January $74,000 $262,500 $336,500 Merchandise Purchases Budget January $262,500 $173,250 $435,750 $183,750 $252,000 $240,000 $23,800 $263,800 Income Statement January $350,000 $17,500 $262,500 $70,000 $23,800 Depreciation Net Operating Income $15,000 $31,200 Budgeted Balance Sheet 31-Dec Assets Cash Accounts receivable (net of allowance for uncollectible accounts) Merchandise inventory Property, plant and equipment (net of $590,000 accumulated depreciation) Total Assets $323,950 $28,650 $178,500 $976,000 $1,507,100 Liabilities and Stockholders' Equity Accounts Payable Common Stock Retained Earnings Total liabilities and stockholders' equity $259,500 $640,000 $607,600 $1,507,100 ash Budget February $88,700 $317,500 $406,200 $275,800 $130,400 $0 $130,400 pected Cash Collections February $70,000 $247,500 March $130,400 $343,500 $473,900 $292,300 $181,600 $0 $181,600 April $181,600 $336,500 $518,100 $290,800 $227,300 $0 $227,300 May $227,300 $340,000 $567,300 $291,550 $275,750 $0 $275,750 June $275,750 $342,000 $617,750 $293,800 $323,950 $0 $323,950 March April May June $66,000 $277,500 $74,000 $262,500 $70,000 $270,000 $317,500 $343,500 $336,500 $340,000 $72,000 $270,000 $342,000 se Purchases Budget February $247,500 $194,250 $441,750 $173,250 $268,500 $252,000 $23,800 $275,800 March $277,500 $183,750 $461,250 $194,250 $267,000 $268,500 $23,800 $292,300 April $262,500 $189,000 $451,500 $183,750 $267,750 $267,000 $23,800 $290,800 May $270,000 $189,000 $459,000 $189,000 $270,000 $267,750 $23,800 $291,550 June $270,000 $178,500 $448,500 $189,000 $259,500 $270,000 $23,800 $293,800 March $370,000 $18,500 $277,500 $74,000 $23,800 April $350,000 $17,500 $262,500 $70,000 $23,800 May $360,000 $18,000 $270,000 $72,000 $23,800 June $360,000 $18,000 $270,000 $72,000 $23,800 me Statement February $330,000 $16,500 $247,500 $66,000 $23,800 July $255,000 $15,000 $27,200 $15,000 $35,200 $15,000 $31,200 $15,000 $33,200 $15,000 $33,200 Cash Disbursements (Budgeted COGS+desired merch inv)-(actual merch inv) Other monthly cash expenses Total Cash disbursements Cash Balance, Beginning Add cash receipts (Prior month accts receivable)+(month sales*collection expected) Total cash available Less cash disbursements Excess of cash available over disbursements Financing Cash balance, Ending January February March April May June $240,000 $295,350 $268,500 $267,000 $267,750 $270,000 $23,800 $23,800 $23,800 $23,800 $23,800 $23,800 $263,800 $319,150 $292,300 $290,800 $291,550 $293,800 $16,000 $336,500 $352,500 $263,800 $88,700 $0 $88,700 $88,700 $317,500 $406,200 $319,150 $87,050 $0 $87,050 $87,050 $343,500 $430,550 $292,300 $138,250 $0 $138,250 $138,250 $336,500 $474,750 $290,800 $183,950 $0 $183,950 $183,950 $340,000 $523,950 $291,550 $232,400 $0 $232,400 $232,400 $342,000 $574,400 $293,800 $280,600 $0 $280,600 Data regarding the store's operations follow: Sales are budgeted as follows: January 350,000 February 330,000 March 370,000 April 350,000 May 360,000 June 360,000 July 340,000 Collections are expected to be 75% in the month of sale, 20% in the month following the sale, and 5% uncollectible. The cost of goods sold is 75% of sales. The company desires an ending merchandise inventory equal to 70% of the cost of goods sold in the following month. Payment for merchandise is made in the month following the purchase. Other monthly expenses to be paid in cash are $23,800. Monthly depreciation is $15,000. Ignore income tax. Balance Sheet December 2016 Required: a. Prepare Cash Budgets for January - June. b. Prepare Budgeted Income Statements for January - June. c. Prepare a Budgeted Balance Sheet for the end of June. 1