eacon Company is a merchandising company that is preparing a budget for the three-month period ended June 30. The following information is available Deacon Company Balance Sheet March 31 Assets Cash $ 68,200 Accounts receivable 42,000 Inventory 63,400 Buildings and equipment, net of depreciation 122,000 Total assets $ 295,600 Liabilities and Stockholders’ Equity Accounts payable $ 96,400 Common stock 70,000 Retained earnings 129,200 Total liabilities and stockholders’ equity $ 295,600 Budgeted Income Statements April May June Sales $ 178,000 $ 188,000 $ 208,000 Cost of goods sold 106,800 112,800 124,800 Gross margin 71,200 75,200 83,200 Selling and administrative expenses 19,000 20,500 23,500 Net operating income $ 52,200 $ 54,700 $ 59,700 Budgeting Assumptions: 60% of sales are cash sales and 40% of sales are credit sales. Twenty percent of all credit sales are collected in the month of sale and the remaining 80% are collected in the month subsequent to the sale. Budgeted sales for July are $218,000. 10% of merchandise inventory purchases are paid in cash at the time of the purchase. The remaining 90% of purchases are credit purchases. All purchases on credit are paid in the month subsequent to the purchase. The accounts payable at March 31 will be paid in April. Each month’s ending merchandise inventory should equal $10,000 plus 50% of the next month’s cost of goods sold. Depreciation expense is $1,800 per month. All other selling and administrative expenses are paid in full in the month the expense is incurred. Required: 1. Calculate the expected cash collections for April, May, and June. 2. Calculate the budgeted merchandise purchases for April, May, and June. 3. Calculate the expected cash disbursements for merchandise purchases for April, May, and June.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

Problem 22E: Ellerson Company provided the following information for the last calendar year: During the year,...

See similar textbooks

Related questions

Question

Deacon Company is a merchandising company that is preparing a budget for the three-month period ended June 30. The following information is available

Deacon Company Balance Sheet March 31
Assets
Cash	$	68,200
Accounts receivable		42,000
Inventory		63,400
Buildings and equipment, net of depreciation		122,000
Total assets	$	295,600
Liabilities and Stockholders’ Equity
Accounts payable	$	96,400
Common stock		70,000
Retained earnings		129,200
Total liabilities and stockholders’ equity	$	295,600

Budgeted Income Statements
	April		May		June
Sales	$	178,000		$	188,000	$	208,000
Cost of goods sold		106,800			112,800		124,800
Gross margin		71,200			75,200		83,200
Selling and administrative expenses		19,000			20,500		23,500
Net operating income	$	52,200		$	54,700	$	59,700

Budgeting Assumptions:

60% of sales are cash sales and 40% of sales are credit sales. Twenty percent of all credit sales are collected in the month of sale and the remaining 80% are collected in the month subsequent to the sale.
Budgeted sales for July are $218,000.
10% of merchandise inventory purchases are paid in cash at the time of the purchase. The remaining 90% of purchases are credit purchases. All purchases on credit are paid in the month subsequent to the purchase. The accounts payable at March 31 will be paid in April.
Each month’s ending merchandise inventory should equal $10,000 plus 50% of the next month’s cost of goods sold.
Depreciation expense is $1,800 per month. All other selling and administrative expenses are paid in full in the month the expense is incurred.

Required:

1. Calculate the expected cash collections for April, May, and June.

2. Calculate the budgeted merchandise purchases for April, May, and June.

3. Calculate the expected cash disbursements for merchandise purchases for April, May, and June.

4. Prepare a budgeted balance sheet at June 30. (Hint: You need to calculate the cash paid for selling and administrative expenses during April, May, and June to determine the cash balance in your June 30 balance sheet.)

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Financial Reporting in Hyperinflationary Economies

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions