Question

Weller Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow:

• Sales are budgeted at $330,000 for November, $350,000 for December, and $340,000 for January.
• Collections are expected to be 70% in the month of sale and 30% in the month following the sale.
• The cost of goods sold is 79% of sales.
• The company desires an ending merchandise inventory equal to 70% of the cost of goods sold in the following month.
• Payment for merchandise is made in the month following the purchase.
• Other monthly expenses to be paid in cash are $20,300.
• Monthly depreciation is $20,100.
• Ignore taxes.

Balance Sheet October 31
Assets
Cash	$	21,100
Accounts receivable		82,100
Merchandise inventory		182,490
Property, plant and equipment (net of $587,000 accumulated depreciation)		997,000
Total assets	$	1,282,690
Liabilities and Stockholders' Equity
Accounts payable	$	195,100
Common stock		520,000
Retained earnings		567,590
Total liabilities and stockholders' equity	$	1,282,690

Required:

a. Prepare a Schedule of Expected Cash Collections for November and December.

b. Prepare a Merchandise Purchases Budget for November and December.

c. Prepare Cash Budgets for November and December.

d. Prepare Budgeted Income Statements for November and December.

e. Prepare a Budgeted Balance Sheet for the end of December.

Answer 1

a.

	November	December
Sales	$    3,30,000.00	$   3,50,000.00
Schedule of expected cash collection
Accounts Receivable	$       82,100.00
November sales	$    2,31,000.00	$      99,000.00
December sales		$   2,45,000.00
Total cash collection	$    3,13,100.00	$   3,44,000.00
Accounts Rec (350000*30%)	$    1,05,000.00

b.

Merchandise Purchase Budget	November	December
Sales	$    3,30,000.00	$   3,50,000.00
Cost of goods sold (79% of sale)	$    2,60,700.00	$   2,76,500.00
Add: Desired ending inventory	$    1,93,550.00	$   1,88,020.00
Total Needs	$    4,54,250.00	$   4,64,520.00
Less: Beginning inventory	$    1,82,490.00	$   1,93,550.00
Budgeted purchase	$    2,71,760.00	$   2,70,970.00

c.

Cash Budget	November	December
Beginning cash balance	$       21,100.00	$   1,18,800.00
Add: Cash Collection	$    3,13,100.00	$   3,44,000.00
Total cash availabale	$    3,34,200.00	$   4,62,800.00
Less: Cash Disbursements :
Cash disbursement for mercandise	$    1,95,100.00	$   2,71,760.00
Other monthly cash expense	$       20,300.00	$      20,300.00
Total cash disbursement	$    2,15,400.00	$   2,92,060.00
Excess/(deficiency)	$    1,18,800.00	$   1,70,740.00
Financing	$                    -	$                   -
Ending cash balance	$    1,18,800.00	$   1,70,740.00

d.

Budgeted Income statement	November	December
Sales	$    3,30,000.00	$   3,50,000.00
Cost of good sold	$    2,60,700.00	$   2,76,500.00
Gross profit	$       69,300.00	$      73,500.00
Less:
Other monthly expenses	$       20,300.00	$      20,300.00
Depreciation	$       20,100.00	$      20,100.00
Net Income	$       28,900.00	$      33,100.00

e.

Balance Sheet
December 31
Assets
Cash	$    1,70,740.00
Accounts Receivable	$    1,05,000.00
Inventory	$    1,88,020.00
Property plant (997000-40200)	$    9,56,800.00
Total Assets	$ 14,20,560.00
Liabilities & Stockholder equity
Accounst Payable	$    2,70,970.00
Common stock	$    5,20,000.00
Retained Earnings	$    6,29,590.00
Total Liabilities & Stockholder equity	$ 14,20,560.00

Please give positive rating.