ABC Imports, Inc. is a distribution of premium Italian wines. The firm’s balance sheet for July 31, 2023 is detailed below: ABC Imports, Inc. Balance Sheet July 31, 2023 Assets Cash $ 9,000 Accounts Receivable 54,000 Inventory 30,000 Buildings and equipment, net of depreciation 207,000 Total Assets $300,000 Liabilities and Shareholders’ Equity Accounts Payable $ 63,000 Notes Payable 14,500 Common Stock 180,000 Retained Earnings 42,500 Total Liabilities and stockholders’ equity $300,000 ABC Imports is currently engaged in preparing a budget for the month of August and has put together the following relevant data: Sales are planned/budgeted at $200,000 for August. Of these planned sales, $ 60,000 will be for cash; the remainder will be credit sales. One-half of a month’s credit sales are to be collected in the month the sales are made, and the remainder is collected in the following month. All of the July 31 accounts receivable will be collected in August. Purchases of inventory are expected to total $120,000 during August. These purchases will all be on account. Forty (40%) of all purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the July 31 accounts payable to suppliers will be paid in August. The August 31 ending inventory balance is budgeted at $40,000. Selling and Administration expenses for August are budgeted at $72,000, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,000 for the month. The Note Payable on the July 31 balance sheet will be paid during August, with $100 interest. (All of the interest relates to May.) New refrigerator storage equipment costing $6,500 will be purchased for cash during August. During August, the company will borrow $20,000 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: Calculate the expected cash collections from the customers for August. Calculate the expected cash disbursements for merchandise purchases for August. Prepare a Cash Budget for August.
ABC Imports, Inc. is a distribution of premium Italian wines. The firm’s balance sheet for July 31, 2023 is detailed below:
ABC Imports, Inc.
Balance Sheet
July 31, 2023
Assets
Cash $ 9,000
Accounts Receivable 54,000
Inventory 30,000
Buildings and equipment, net of
Total Assets $300,000
Liabilities and Shareholders’ Equity
Accounts Payable $ 63,000
Notes Payable 14,500
Common Stock 180,000
Total Liabilities and
ABC Imports is currently engaged in preparing a budget for the month of August and has put together the following relevant data:
- Sales are planned/budgeted at $200,000 for August. Of these planned sales, $ 60,000 will be for cash; the remainder will be credit sales. One-half of a month’s credit sales are to be collected in the month the sales are made, and the remainder is collected in the following month. All of the July 31 accounts receivable will be collected in August.
- Purchases of inventory are expected to total $120,000 during August. These purchases will all be on account. Forty (40%) of all purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the July 31 accounts payable to suppliers will be paid in August.
- The August 31 ending inventory balance is budgeted at $40,000.
- Selling and Administration expenses for August are budgeted at $72,000, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,000 for the month.
- The Note Payable on the July 31 balance sheet will be paid during August, with $100 interest. (All of the interest relates to May.)
- New refrigerator storage equipment costing $6,500 will be purchased for cash during August.
- During August, the company will borrow $20,000 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:
- Calculate the expected cash collections from the customers for August.
- Calculate the expected cash disbursements for merchandise purchases for August.
- Prepare a
Cash Budget for August. - Using a “traditional” income statement as your guide, prepare a
budgeted income statement for August. - Prepare a budgeted balance sheet as of August 31, 2023.
Suggested Income Statement Format
ABC Imports, Inc.
Budgeted Income Statement
For the Month Ending August 31, 2023
Sales
Cost of Goods Sold
Gross Profit
Selling and Administration Expenses
Net Operating Income
Interest expense
Net Income
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
