70.2K

Verified Solution

Link Copied!

Dresser Corporation sells bedroom furniture. Data regarding the store's operations follow:

Sales are budgeted at $330,000 for November, $300,000 for December, and $320,000 for January.

Collections are expected to be 85% in the month of sale and 15% in the month following the sale.

The cost of goods sold is 60% of sales.

The company desires an ending merchandise inventory equal to 80% 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 $21,200.

Monthly depreciation is $21,000.

Ignore taxes.

Balance Sheet October 31
Assets
Cash	$	22,000
Accounts receivable		83,000
Merchandise inventory		158,400
Property, plant and equipment (net of $594,000 accumulated depreciation)		1,004,000
Total assets	$	1,267,400
Liabilities and Stockholders' Equity
Accounts payable	$	196,000
Common stock		620,000
Retained earnings		451,400
Total liabilities and stockholders' equity	$	1,267,400

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 & Explanation Solved by verified expert

See Answer