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Elon Co.'s September balance sheet contains the following information: $ 66,300 (dr) 226,500 (dr) 4,400 (cr) 31,850 (de) Cash Accounts receivable.. Allowance for doubtful accounts Merchandise inventory Management has designated $62,000 as the firm's minimum monthly cash balance. Other information about the firm and its operations is as follows: a. Sales revenues of $638,000, $756,000, and $560,500 are expected for October, November, and December, respectively. All goods are sold on account. b. The collection pattern for accounts receivable is 60% in the month of sale, 39% in the month following the month of sale, and 1% uncollectible, which is set up as an allowance. c. Cost of goods sold is 60% of sales revenues.

Elon Co.'s September balance sheet contains the following information: $ 66,300 (dr) 226,500 (dr) 4,400 (cr) 31,850 (de) Cash Accounts receivable.. Allowance for doubtful accounts Merchandise inventory Management has designated $62,000 as the firm's minimum monthly cash balance. Other information about the firm and its operations is as follows: a. Sales revenues of $638,000, $756,000, and $560,500 are expected for October, November, and December, respectively. All goods are sold on account. b. The collection pattern for accounts receivable is 60% in the month of sale, 39% in the month following the month of sale, and 1% uncollectible, which is set up as an allowance. c. Cost of goods sold is 60% of sales revenues.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Required: 1. Prepare a merchandise purchases budget for October and November. Total needs Total cash available Deduct Disbursements Total disbursements Excess (deficiency) of cash Financing Elon Co. Merchandise Purchases Budget 2. Prepare the cash budgets for October and November, including the effects of financing (borrowing or investing). Interest is earned or paid quarterly. (Any "Repayments" and "Interest" should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required.) Investments Borrowings Repayments Interest Total financing Elon Co. Cash Budget October 0 October November 0 November December 0
Transcribed Image Text:Required: 1. Prepare a merchandise purchases budget for October and November. Total needs Total cash available Deduct Disbursements Total disbursements Excess (deficiency) of cash Financing Elon Co. Merchandise Purchases Budget 2. Prepare the cash budgets for October and November, including the effects of financing (borrowing or investing). Interest is earned or paid quarterly. (Any "Repayments" and "Interest" should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required.) Investments Borrowings Repayments Interest Total financing Elon Co. Cash Budget October 0 October November 0 November December 0
Elon Co.'s September balance sheet contains the following information: $ 66,300 (de) 226,800 (de) 4,400 (cr) 31,850 (de) Cash Accounts receivable... Allowance for doubtful accounts Merchandise inventory Management has designated $62,000 as the firm's minimum monthly cash balance. Other information about the firm and its operations is as follows: a. Sales revenues of $638,000, $756.000, and $560,500 are expected for October November, and December, respectively. All goods are sold on account. b. The collection pattern for accounts receivable is 60% in the month of sale, 39% in the month following the month of sale, and 1% uncollectible, which is set up as an allowance. c. Cost of goods sold is 60% of sales revenues. d. Management's target ending balance of merchandise inventory is 10% of the current month's budgeted cost of goods sold. e. All accounts payable for inventory are paid in the month of purchase. 1. Other monthly expenses are $84,850, which includes $5.900 of depreciation and 75,350 of bad debt expense. g. In the event of a shortfall, the company borrows money. In contrast, in the event of excess cash, the company invests in short-term investments. Borrowings and investments are assumed to be made at the end of a month in increments of $10.600. h. Interest on borrowings is 10% per year, payable every quarter on the accumulated amount of the loan; similarly, interest earned on investments is 8% per year on the accumulated investments and is received every quarter, Investments can be matured and the principal amount redeemed in June or December of a year. Required: 1. Prepare a merchandise purchases budget for October and November.
Transcribed Image Text:Elon Co.'s September balance sheet contains the following information: $ 66,300 (de) 226,800 (de) 4,400 (cr) 31,850 (de) Cash Accounts receivable... Allowance for doubtful accounts Merchandise inventory Management has designated $62,000 as the firm's minimum monthly cash balance. Other information about the firm and its operations is as follows: a. Sales revenues of $638,000, $756.000, and $560,500 are expected for October November, and December, respectively. All goods are sold on account. b. The collection pattern for accounts receivable is 60% in the month of sale, 39% in the month following the month of sale, and 1% uncollectible, which is set up as an allowance. c. Cost of goods sold is 60% of sales revenues. d. Management's target ending balance of merchandise inventory is 10% of the current month's budgeted cost of goods sold. e. All accounts payable for inventory are paid in the month of purchase. 1. Other monthly expenses are $84,850, which includes $5.900 of depreciation and 75,350 of bad debt expense. g. In the event of a shortfall, the company borrows money. In contrast, in the event of excess cash, the company invests in short-term investments. Borrowings and investments are assumed to be made at the end of a month in increments of $10.600. h. Interest on borrowings is 10% per year, payable every quarter on the accumulated amount of the loan; similarly, interest earned on investments is 8% per year on the accumulated investments and is received every quarter, Investments can be matured and the principal amount redeemed in June or December of a year. Required: 1. Prepare a merchandise purchases budget for October and November.
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