Concept explainers
Minden Company is a wholesale distributor of premium European chocolates. The company’s balance sheet as of April 30 is given below:
The company is in the process of preparing a budget for May and has assembled the following data:
a. Sales are budgeted at $200, 000 for May. Of these sales, $60,000 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.
b. Purchases of inventory are expected to total Si 20,000 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.
c. The May 31 inventory balance is budgeted at $40,000.
d. Selling and administrative expenses for May are budgeted at $72,000, exclusive of
Depreciation is budgeted at $2,000 for the month.
e. The note payable on the April 30 balance sheet will be paid during May, with S 100 in interest. (All of the interest relates to May.)
f New refrigerating equipment costing $6,500 will be purchased for cash during May.
g. During Ma, 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:
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. Using Schedule 9 as your guide, prepare a
5. Prepare a budgeted balance sheet as of May 31.
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Chapter 8 Solutions
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