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

$

14,300

Accounts receivable

55,750

Inventory

49,250

Buildings and equipment, net of depreciation

217,000

Total assets

$

336,300

Liabilities and Stockholders Equity

Accounts payable

$

65,000

Note payable

16,500

Common stock

180,000

Retained earnings

74,800

Total liabilities and stockholders equity

$

336,300

a.

Sales are budgeted at $292,000 for May. Of these sales, $87,600 will be for cash; the remainder will be credit sales. One-half of a months credit sales are collected in the month the sales are made, and the remainder is collected in the following month. All of the April 30 accounts receivable will be collected in May.

b.

Purchases of inventory are expected to total $216,000 during May. These purchases will all be on account. Forty percent of all purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the April 30 accounts payable to suppliers will be paid during May.

c.

The May 31 inventory balance is budgeted at $72,500.

d.

Selling and administrative expenses for May are budgeted at $82,200, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $4,500 for the month.

e.

The note payable on the April 30 balance sheet will be paid during May, with $375 in interest. (All of the interest relates to May.)

f.

New refrigerating equipment costing $7,100 will be purchased for cash during May.

g.

During May, the company will borrow $20,500 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.

1-b.

Prepare a cash budget for May. (Cash deficiency, repayments and interest should be indicated by a minus sign.)

Minden Company
Cash Budget
For the Month of May
Beginning cash balance	$14,300
Add collections from customers	245,550
Total cash available	259,850
Less cash disbursements:
Purchase of inventory	151,400
Selling and administrative expenses	82,200
Purchases of equipment	7,100
Total cash disbursements	240,700
Excess of cash available over disbursements	19,150
Financing:
Borrowingnote	20,500
Repaymentsnote	?
Interest	?
Total financing	20,500
Ending cash balance	$39,650

2.

Prepare a budgeted income statement for May.

Minden Company
Budgeted Income Statement
For the Month of May
Sales		?
Cost of goods sold:
Beginning inventory	?
Purchases	?
?	0
Ending inventory	?
		0
Gross margin		0
?		?
Net operating income		0
Interest expense		?
Net income		$0