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HW. Q3 Deacon Company is a merchandising company that is preparing a budget for the three-month period ended June 30th. The following information is available

HW. Q3 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 $ 71,800
Accounts receivable 42,800
Inventory 46,000
Buildings and equipment, net of depreciation 149,000
Total assets $ 309,600
Liabilities and Stockholders Equity
Accounts payable $ 125,100
Common stock 70,000
Retained earnings 114,500
Total liabilities and stockholders equity $ 309,600

Budgeted Income Statements
April May June
Sales $ 120,000 $ 130,000 $ 150,000
Cost of goods sold 72,000 78,000 90,000
Gross margin 48,000 52,000 60,000
Selling and administrative expenses 18,100 19,600 22,600
Net operating income $ 29,900 $ 32,400 $ 37,400

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 $160,000.

  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 $1,850 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.)

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