USA: +1 (725) 712-1730 
Sign in
Minden Company is a wholesale distributor of premium European chocolates. The company’s balance sheet as of April 30 is given below:
| Minden Company Balance Sheet April 30 |
||
| Assets | ||
| Cash | $ | 9,200 |
| Accounts receivable | 76,250 | |
| Inventory | 49,750 | |
| Buildings and equipment, net of depreciation | 228,000 | |
| Total assets | $ | 363,200 |
| Liabilities and Stockholders’ Equity | ||
| Accounts payable | $ | 63,750 |
| Note payable | 23,900 | |
| Common stock | 180,000 | |
| Retained earnings | 95,550 | |
| Total liabilities and stockholders’ equity | $ | 363,200 |
The company is in the process of preparing a budget for May and has assembled the following data:
Sales are budgeted at $227,000 for May. Of these sales, $68,100 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 April 30 accounts receivable will be collected in May.
Purchases of inventory are expected to total $159,000 during May. 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 April 30 accounts payable to suppliers will be paid during May.
The May 31 inventory balance is budgeted at $87,500.
Selling and administrative expenses for May are budgeted at $79,500, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $6,000 for the month.
The note payable on the April 30 balance sheet will be paid during May, with $105 in interest. (All of the interest relates to May.)
New refrigerating equipment costing $11,800 will be purchased for cash during May.
During May, the company will borrow $25,100 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. Calculate the expected cash collections for May.
2. Calculate the expected cash disbursements for merchandise purchases 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.
Complete this question by entering your answers in the tabs below.
Required 1 & 2
Require 3 : Prepare a cash budget for May. (Cash deficiency, repayments and interest should be indicated by a minus sign.)
Required 4
Required 5 : Prepare a budgeted balance sheet as of May 31.
Req 1 and 2 Req 3 Req 4 Req 5 1. Calculate the expected cash collections for May. 2. Calculate the expected cash disbursements for merchandise purchases for May Total cash collections Total cash disbursements
Expert Answer
1. expected cash collections for May
Cash sales = $68,100
Collection on Accounts receivables:
April 30, accounts receivable = 76,250
May’s credit sales[50%*(227,000 – 68,100)] = 79450
Total cash collection = $223800
2. expected cash disbursements for merchandise purchases for May
April 30 accounts payable = 63,750
May credit purhcase [40% *$159,000 ] = 63600
Total cash disbursement = $127350
3. cash budget for May
| Beginning Balance | 9,200 |
| Add: collection form customers | 223800 |
| Total cash available | 233000 |
| less: cash disbursement : | |
| Purchase of inventory | 127350 |
| Selling and administrative expense | 79,500 |
| Purchase of Equipment | 11,800 |
| Total cash disbursement | 218650 |
| Excess of cash available over disbursements | 14350 |
| Financing: | |
| Borrowing- note | 25,100 |
| Repayment- note | (23,900) |
| Interest | (105) |
| Total Financing | 1095 |
| Ending cash balance | $15445 |
4. budgeted income statement for May
| Sales | $227,000 |
| less : cost of goods sold
[$49,750 opening inventory +$159,000 purchase – $87,500 opening inventory] |
121250 |
| Gross profit | 105750 |
| less: Depreciation | (6,000) |
| Selling and administrative expenses | (79,500) |
| Interest | (105 ) |
| Net income | $20145 |
5. budgeted balance sheet as of May 31
| Minden Company Balance Sheet April 30 |
||
| Assets | ||
| Cash | $ | 15445 |
| Accounts receivable | 79450 | |
| Inventory | 87,500 | |
| Buildings and equipment, net of depreciation
[228,000 – 6000 depreciation + 11,800 New equipment ] |
233800 | |
| Total assets | $ | 416195 |
| Liabilities and Stockholders’ Equity | ||
| Accounts payable | $ | 95400 |
| Note payable | 25,100 | |
| Common stock | 180,000 | |
| Retained earnings
[95,550 + 20145 net income] |
115695 | |
| Total liabilities and stockholders’ equity | $ | 416195 |
