Question
Minden Company is a wholesale distributor of premium European chocolates. The companys balance sheet as of April 30 is given below: Minden Company Balance Sheet
Minden Company is a wholesale distributor of premium European chocolates. The companys balance sheet as of April 30 is given below:
Minden Company Balance Sheet April 30 | ||
Assets | ||
Cash | $ | 9,000 |
Accounts receivable | 54,000 | |
Inventory | 30,000 | |
Buildings and equipment, net of depreciation | 207,000 | |
Total assets | $ | 300,000 |
Liabilities and Stockholders Equity | ||
Accounts payable | $ | 63,000 |
Note payable | 14,500 | |
Common stock | 180,000 | |
Retained earnings | 42,500 | |
Total liabilities and stockholders equity | $ | 300,000 |
The company is in the process of preparing a budget for May and has assembled the following data:
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Sales are budgeted at $220,000 for May. Of these sales, $60,000 will be for cash; the remainder will be credit sales. Each months credit sales are collected 60% in the month of sale and 40% in the month following the sale. All of the April 30 accounts receivable will be collected in May.
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Purchases of inventory are expected to total $120,000 during May. These purchases will all be on account. The company pays for 50% of its merchandise purchases in the month of the purchase and the remaining 50% in the month following the purchase. All of the April 30 accounts payable to suppliers will be paid during May.
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The May 31 inventory balance is budgeted at $40,000.
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Selling and administrative expenses for May are budgeted at $72,000, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,000 for the month.
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The note payable on the April 30 balance sheet will be paid during May, with $100 in interest. (All of the interest relates to May.)
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New refrigerating equipment costing $6,500 will be purchased for cash during May.
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During May, the company will borrow $20,000 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.
Required:
1. Calculate the expected cash collections for May.
2. Calculate the expected cash disbursements for merchandise purchases for May.
3. Prepare a cash budget for May.
4. Prepare a budgeted income statement for May.
5. Prepare a budgeted balance sheet as of May 31.
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