Question

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 $ 10,500 Accounts receivable 57,000 Inventory 42,500 Buildings and equipment, net of depreciation 236,000 Total assets $ 346,000 Liabilities and Stockholders’ Equity Accounts payable $ 72,750 Note payable 21,200 Common stock 180,000 Retained earnings 72,050 Total liabilities and stockholders’ equity $ 346,000 The company is in the process of preparing a budget for May and has assembled the following data: Sales are budgeted at $296,000 for May. Of these sales, $88,800 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 $192,000 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 $51,500. Selling and administrative expenses for May are budgeted at $98,700, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,150 for the month. The note payable on the April 30 balance sheet will be paid during May, with $220 in interest. (All of the interest relates to May.) New refrigerating equipment costing $6,800 will be purchased for cash during May. During May, the company will borrow $23,200 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.

Answer 1

Answer 1 and 2.

Answer 3.

Answer 4.

Answer 5.