Question #$2(20$ marks$)$

Baker Company is a wholesale distributor of premium European chocolates. The company's

balance sheet as of November $30$ is given below:

The company is in the process of preparing a budget for December and has assembled the

following data $-$

a$.$ Sales are budgeted at $$200,000$ for December. Of these sales, $$60,000$ will be for cash;

the remainder will be credit sales. One$-$half of a month's credit sales are collected in the

month the sales are made, and the remainder is collected in the following month. All of

the November $30$ accounts receivable will be collected in December.

b$.$ Purchases of inventory are expected to total $$120,000$ during December. 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 November $30$

accounts payable to suppliers will be paid during December.

c$.$ The December $31$ inventory balance is budgeted at $$40,000.$

d$.$ Selling and administrative expenses for December are budgeted at $$72,000,$ exclusive of

depreciation. These expenses will be paid in cash. Depreciation is budgeted at $$2,000$

for the month.

e$.$ The note payable on the November $30$ balance sheet will be paid during December, with

$$100$ in interest. $($All of the interest relates to December.$)$

f$.$ New refrigerating equipment costing $$6,500$ will be purchased for cash during

December.

g$.$ During December, 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 $-$

$1-$a$.$ Prepare a schedule of expected cash collections from sales and a schedule of expected cash

disbursements for merchandise purchases.

$1-$b$.$ Prepare a cash budget for December.

Prepare a budgeted income statement $($in proper format$)$ for December.

Prepare a budgeted balance sheet $($in proper format$)$ as of December $31.$