Question 1 (43 marks) BBTalk Company Limited sells tiles and other decoration products. Data of the store's operations are as follow: Sales are budgeted at $340,000 for November 2019, $320,000 for December 2019, and $330,000 for January 2020. Collections are expected to be 85% in the month of sale, 14% in the month following the sale, and 1% uncollectible will be recorded as bad debt expense. The cost of goods sold is 60% of sales. The company purchases 78% of its merchandise in the month prior to the month of sale and 22% in the month of sale. Payment for inventory is made in the month following the purchase. Depreciation is $20,200 per month. Other monthly expenses to be paid in cash are $18,000. Other information as at 31 Oct 2019: Cash $42,000 Accounts receivable (net of allowance for uncollectible accounts) $85,000 Accounts payable $218,000 Ignore taxes. Required: a. Prepare a Schedule of Expected Cash Collection for November and December. (8 marks) b. Prepare a Merchandise Purchases Budget for November and December. (10 marks) c. Prepare a Cash Budget showing the captions with figures of beginning, excess/(deficiency), ending balance and so on for November and December (10 marks) d. Prepare an Income Statement Budget for November and December (15 marks) Required: a. Prepare a Schedule of Expected Cash Collections for November and December WELDON INDUSTRIAL GAS CORPORATION Schedule of Expected Cash Collections November December Sales $ 350,000 $ 370,000 Schedule of Expected Cash Collections Accounts receivable November sales December sales Total cash collections S O S O b. Prepare a Merchandise Purchases Budget for November and December. Input all amounts positive values. Do not round intermediate calculations.) December WELDON INDUSTRIAL GAS CORPORATION Merchandise Purchases Budget November Budgeted cost of goods sold 'Add: Desired ending merchandising inventory Total needs 0 'Deduct: Beginning merchandise inventory Required purchase $ 0 0 $ 0 c. Prepare Cash Budgets for November and December (Input all amounts as positive values.) WELDON INDUSTRIAL GAS CORPORATION Cash Budget November December Cash disbursements for merchandise Other monthly cash expenses Total cash disbursements SOSO Cash balance, beginning Add cash receipts Total cash available o o Less cash disbursement Excess (deficiency of cash available over o disbursements Financing Cash balance, ending S O S d. Prepare Budgeted Income Statements for November and December. WELDON INDUSTRIAL GAS CORPORATION Budgeted Income Statement November December Sales Cost of goods sold Gross margin Other monthly expenses Bad debt expense Depreciation Net operating income $ 0 $
