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24 August, 18:18

Wheeling company is a merchandiser that provided a balance sheet as of september 30 as shown below:

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  1. 24 August, 19:09
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    Wheeling Company is a merchandiser that provided a balance sheet as of September 30 as shown below:

    Cash $69,800, Accounts Receivable 98,000, Inventory 37,800, Building and Equipment, net of depreciation 310,000 Total Assets 515,600. Accounts payable $145,100, Common Stock 216,000, and Retained Earnings 154,500, Total Liabilities and Equity 515,600

    The company is in the process of preparing a budget for October and has assembled the following dа ta:

    Sales are budgeted at $280,000 for October and $290,000 for November. Of these sales, 35% will be for cash; the remainder will be credit sales. Forty percent of a month's credit sales are collected in the month the sales are made, and the remaining 60% is collected in the following month. All of the September 30 accounts receivable will be collected in October.

    The budgeted cost of goods sold is always 45% of sales and the ending merchandise inventory is always 30% of the following month's cost of goods sold.

    All merchandise purchases are on account. Thirty percent of all purchases are paid for in the month of purchase and 70% are paid for in the following month. All of the September 30 accounts payable to suppliers will be paid during October.

    Selling and administrative expenses for October are budgeted at$80,000, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $3,100 for the month.

    Required:

    1. Using the information provided, calculate or prepare the following:

    a. The budgeted cash collections for October.

    b. The budgeted merchandise purchases for October.

    c. The budgeted cash disbursements for merchandise purchases for October.

    d. The budgeted net operating income for October.

    e. A budgeted balance sheet at October 31.

    Solution:

    1)

    a. The budgeted cash collections for October:

    Cash Sales 35% of $280,000 = $98,000

    Cash Collection 40% of 65% $280,000 = $72,800

    September Receivables = $98,000

    Total $268,800

    b. The budgeted merchandise purchases for October:

    Cost of Goods Sold: 45% of $280,000 = $126,000

    Ending Inventory: 30% of 45% $290,000 = $39,150

    Total Cost of Goods Available for sale = $165,150

    Less Beginning Inventory = $37,800

    Purchases for the month = $127,350

    c. Merchandise Cash Disbursements for October:

    October: 30% of $127,350 = $38,205

    September Accounts Payable = $145,100

    Total = $183,305

    d. The budgeted net operating income for October.

    Sales $280,000

    Cost of Sales 126,000

    Gross profit 154,000

    Less Selling & Admin. (80,000)

    Less Depreciation on Equip. (3,100)

    Net Income 70,900

    e. A budgeted balance sheet at October 31.

    Cash $75,295

    Accounts Receivable 109,200

    Inventory 39,150

    Building and Equipment 310,000

    Total Assets $533,645

    Accounts payable $89,145

    Common Stock 216,000

    Retained Earnings 225,400

    Depreciation 3,100

    Total Liabilities & Equity $533,645

    (2) 50% of a month's credit sales are collected in the month the sales are made and the remaining 50% is collected in the following month, (2) the ending merchandise inventory is always 10% of the following month's cost of goods sold, and (3) 20% of all purchases are paid for in the month of purchase and 80% are paid for in the following month. Using these new assumptions, calculate or prepare the following:

    a. The budgeted cash collections for October:

    Cash Sales 35% of $280,000 = $98,000

    Cash Collection 50% of 65% $280,000 = $91,000

    September Receivables = $98,000

    Total $287,000

    b. The budgeted merchandise purchases for October:

    Cost of Goods Sold: 45% of $280,000 = $126,000

    Ending Inventory: 10% of 45% $290,000 = $13,050

    Total Cost of Goods Available for sale = $139,050

    Less Beginning Inventory = $37,800

    Purchases for the month = $101,250

    c. The budgeted cash disbursements for merchandise purchases for October:

    Cash October: 20% of $101,250 = $20,250

    September Accounts Payable = $145,100

    Total = $165,350

    d. The budgeted net operating income for October:

    Sales $280,000

    Cost of Sales 126,000

    Gross profit 154,000

    Less Selling & Admin (80,000)

    Less Depreciation (3,100)

    Net Income 70,900

    e. A budgeted balance sheet at October 31:

    Cash $111,450

    Accounts Receivable 91,000

    Inventory 13,050

    Building and Equipment 310,000

    Total Assets $525,500

    Accounts payable $81,000

    Common Stock 216,000

    Retained Earnings 225,400

    Depreciation 3,100

    Total Liabilities & Equity $525,500

    Explanation:

    1. Cash Budget:

    Beginning Balance $69,800

    Cash Collections $268,800

    Cash Disbursement: $263,305

    Merchandise $183,305

    Selling & Admin $80,000

    Ending Balance $75,295

    2. Accounts Receivable = 60% of 65% of $280,000 = $109,200

    3. Accounts Payable = 70% of $127,350 = $89,145

    4. Retained Earnings = $154,500 + 70,900 = $225,400

    5. Cash Budget:

    Beginning Balance $69,800

    Cash Collections $287,000

    Cash Disbursement: $245,350

    Merchandise $165,350

    Selling & Admin $80,000

    Ending Balance $111,450

    6. Accounts Receivable = 50% of 65% of $280,000 = $91,000

    7. Accounts Payable = 80% of $101,250 = $81,000

    8. Retained Earnings = $154,500 + 70,900 = $225,400
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