Problem 8-19 Cash Budget; Income Statement; Balance Sheet[LO8-2, LO8-4, LO8-8, LO8-9, LO8-10]
Minden Company is a wholesale distributor of premium Europeanchocolates. The company’s balance sheet as of April 30 is givenbelow:
Minden Company
Balance Sheet
April 30 |
| Assets |
| Cash | $ | 10,000 |
| Accounts receivable | | 62,750 |
| Inventory | | 32,750 |
| Buildings and equipment, net of depreciation | | 219,000 |
| Total assets | $ | 324,500 |
| Liabilities and Stockholders’Equity |
| Accounts payable | $ | 69,000 |
| Note payable | | 22,700 |
| Common stock | | 180,000 |
| Retained earnings | | 52,800 |
| Total liabilities and stockholders’ equity | $ | 324,500 |
|
The company is in the process of preparing a budget for May andhas assembled the following data:
Sales are budgeted at $254,000 for May. Of these sales, $76,200will be for cash; the remainder will be credit sales. One-half of amonth’s credit sales are collected in the month the sales are made,and the remainder is collected in the following month. All of theApril 30 accounts receivable will be collected in May.
Purchases of inventory are expected to total $137,000 duringMay. These purchases will all be on account. Forty percent of allpurchases are paid for in the month of purchase; the remainder arepaid in the following month. All of the April 30 accounts payableto suppliers will be paid during May.
The May 31 inventory balance is budgeted at $45,000.
Selling and administrative expenses for May are budgeted at$98,400, exclusive of depreciation. These expenses will be paid incash. Depreciation is budgeted at $5,550 for the month.
The note payable on the April 30 balance sheet will be paidduring May, with $350 in interest. (All of the interest relates toMay.)
New refrigerating equipment costing $8,700 will be purchased forcash during May.
During May, the company will borrow $27,400 from its bank bygiving a new note payable to the bank for that amount. The new notewill be due in one year.
Required:
1. Calculate the expected cash collections from customers forMay.
2. Calculate the expected cash disbursements for merchandisepurchases for May.
3. Prepare a cash budget for May.
4. Prepare a budgeted income statement for May.
5. Prepare a budgeted balance sheet as of May 31.
