Weldon Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow:

Sales are budgeted at $360,000 for November, $380,000 for December, and $350,000 for January. Collections are expected to be 75% in the month of sale, 20% in the month following the sale, and 5% uncollectible. The cost of goods sold is 65% of sales. The company desires an ending merchandise inventory equal to 60% of the cost of goods sold in the following month. Payment for merchandise is made in the month following the purchase. Other monthly expenses to be paid in cash are $61,900. Monthly depreciation is $20,000.

Equipment purchased in December of $55,000.

Dividend paid in December of $75,000.

Financing: If cash is over $50,000 at the end of any month, pay back loan in increments of $5,000. If cash is under 15,000 at the end of any month, borrow in $5,000 increments.

Ignore taxes.

Balance Sheet

October 31

Assets:

Cash $ 16,000

Accounts receivable (net of allowance for uncollectible accounts) 74,000

Merchandise inventory 140,400

Property, plant and equipment (net of $500,000 accumulated depreciation) 1,066,000

Total assets $1,296,400

Liabilities and Stockholders Equity:

Accounts payable $ 240,000

Notes payable 115,000

Common stock 640,000

Retained earnings 301,400

Total liabilities and stockholders equity $1,296,400

Required:

a. Prepare a Schedule of Expected Cash Collections for November and December. b. Prepare a Merchandise Purchases Budget for November and December. c. Prepare Cash Budgets for November and December. d. Prepare Budgeted Income Statements for November and December. e. Prepare a Budgeted Balance Sheet for the end of December.

Answer:

a November December

Sales $ $

Schedule of Expected Cash Collections

Accounts receivable $

November sales $

December sales .

Total cash collections $ $ .

b. November December

Budgeted cost of goods sold $ $

Add desired ending merchandise inventory

.

Total needs

Less beginning merchandise inventory .

Required purchases $ $ .

c. November December

Cash disbursements for merchandise $ $

Other monthly expenses

Dividends paid

Equipment purchased .

Total cash disbursements $ $ .

Beginning cash balance $ $

Add cash receipts .

Total cash available

Less cash disbursements .

Excess (deficiency) of cash available over disbursements

Financing .

Ending cash balance $ $ .

d. November December

Sales $ $

Cost of goods sold .

Gross margin .

Bad debt expense

Other monthly expenses

Depreciation .

Total expenses .

Net operating income $ $ .

e. Balance Sheet

December 31

Assets:

Cash $

Accounts receivable (net of allowance for uncollectible accounts)

Merchandise inventory

Property, plant and equipment (net of $540,000 accumulated depreciation) .

Total assets $ .

Liabilities and Stockholders Equity:

Accounts payable $

Notes payable

Common stock

Retained earnings .

Total liabilities and stockholders equity $ .

Hottle Jeep Tours operates jeep tours in the heart of the Colorado Rockies. The company bases its budgets on two measures of activity (i.e., cost drivers), namely guests and jeeps. One vehicle used in one tour on one day counts as a jeep. Each jeep has one tour guide. The company uses the following data in its budgeting: In February, the company budgeted for 342 guests and 146 jeeps. The company's income statement showing the actual results for the month appears below: Required: Prepare a flexible budget performance report showing both the company's activity variances and revenue and spending variances for February. Label each variance as favorable (F) or unfavorable (U).

Answer:

Hottle Jeep Tours

Flexible Budget Performance Report

For the Month Ended February 28

Revenue and

Actual Spending Flexible Activity Planning

Results Variances Budget Variances Budget

Guests

Jeeps

Revenues .

Expenses:

Tour guide wages

Vehicle expenses

Administrative expenses .

Total expense .

Net operating income .