Item6 15points eBook Item 6 Deacon Company is a merchandising company that is preparing a budget for the second quarter of the calendar year The following information is available DEACON COMPANY Balance Sheet March 31 Assets Cash $ 49,000 Accounts receivable 43,000 Inventory 31,000 Plant and equipment, net of depreciation 109,000 Total assets $ 232,000 Liabilities and Shareholders Equity Accounts payable $ 60,000 Common shares 64,000 Retained earnings 108,000 Total liabilities and shareholders equity $ 232,000 Budgeted Income Statements April May June Sales $ 104,000 $ 110,000 $ 132,000 Cost of goods sold 62,400 66,000 79,200 Gross margin 41,600 44,000 52,800 Selling and administrative expenses 16,000 10,000 15,000 Operating income $ 25,600 $ 34,000 $ 37,800 Budgeting Assumptions Sixty percent of sales are cash sales and 40 percent of sales are credit sales Twenty percent of all credit sales are collected in the month of sale and the remaining 80 percent are collected in the month subsequent to the sale Budgeted sales for July are $146,000 while the budgeted cost of goods sold is 60 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 Each months ending merchandise inventory should equal $15,000 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 30 ( 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 30 balance sheet )

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Item6 15points eBook Item 6 Deacon Company is a merchandising company that is preparing a budget for the second quarter of the calendar year. The

Item6

15points

eBook

Item 6

Deacon Company is a merchandising company that is preparing a budget for the second quarter of the calendar year. The following information is available.

DEACON COMPANY
Balance Sheet
March 31
Assets
Cash	$	49,000
Accounts receivable		43,000
Inventory		31,000
Plant and equipment, net of depreciation		109,000
Total assets	$	232,000
Liabilities and Shareholders Equity
Accounts payable	$	60,000
Common shares		64,000
Retained earnings		108,000
Total liabilities and shareholders equity	$	232,000

Budgeted Income Statements
April		May	June
Sales	$	104,000	$	110,000	$	132,000
Cost of goods sold		62,400		66,000		79,200
Gross margin		41,600		44,000		52,800
Selling and administrative expenses		16,000		10,000		15,000
Operating income	$	25,600	$	34,000	$	37,800

Budgeting Assumptions:

Sixty percent of sales are cash sales and 40 percent of sales are credit sales. Twenty percent of all credit sales are collected in the month of sale and the remaining 80 percent are collected in the month subsequent to the sale.
Budgeted sales for July are $146,000 while the budgeted cost of goods sold is 60%.
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.
Each months ending merchandise inventory should equal $15,000 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 30. (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 30 balance sheet.)