Question
Please help me answer these questions Minden Company is a wholesale distributor of premium European chocolates. The companys balance sheet as of April 30 is
Please help me answer these questions
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 assembled the following data:
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.
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.
The May 31 inventory balance is budgeted at $40,000.
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.
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.)
New refrigerating equipment costing $6,500 will be purchased for cash during May.
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:
For May:
- Calculate the expected cash collections.
- Calculate the expected cash disbursements for merchandise purchases.
- Prepare a cash budget.
- Prepare a budgeted income statement.
- Prepare an end-of-month budgeted balance sheet.
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