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	$	18,700
Accounts receivable		70,250
Inventory		41,250
Buildings and equipment, net of depreciation		230,000
Total assets	$	360,200
Liabilities and Stockholders’ Equity
Accounts payable	$	72,250
Note payable		13,700
Common stock		180,000
Retained earnings		94,250
Total liabilities and stockholders’ equity	$	360,200

The company is in the process of preparing a budget for May and has assembled the following data:

1. Sales are budgeted at $214,000 for May. Of these sales, $64,200 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.

2. Purchases of inventory are expected to total $122,000 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.

3. The May 31 inventory balance is budgeted at $47,500.

4. Selling and administrative expenses for May are budgeted at $85,500, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,050 for the month.

5. The note payable on the April 30 balance sheet will be paid during May, with $390 in interest. (All of the interest relates to May.)

6. New refrigerating equipment costing $16,300 will be purchased for cash during May.

7. During May, the company will borrow $24,500 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.

1 and 2:

Total cash collections
Total cash disbursements

3:

Minden Company
Cash Budget
For the month of May
Beginning cash balance
Add collections from customers
Total cash available
Less cash disbursements:
Purchase of inventory
Selling and administrative expenses
Purchases of equipment
Total cash disbursements
Excess of cash available over disbursements
Financing:
Borrowing- note
Repayments- note
Interest
Total financing
Ending cash balance

4:

Minden Company
Budgeted Income Statement
For the Month of May

5:

Minden Company
Budgeted Balance Sheet
May 31
Assets
Total assets:
Liabilities and Stockholders' Equity
Total liabilities and stockholders' equity:

Answer 1

1-a)	Schedule of Expected cash collection
	Cash sales-May					64,200
	Collections on account receivable
	April 30 balance					70,250
	May sales		(214000-64200)*50%			74900
	total cash recepits					209,350
	Schedule of Expected cash disbursements
	April 30 accounts payable balance					72,250
	May purchases		(122000*40%)			48800
	total cash payments					121,050
1-b)	Cash Budget
	Beginning cash balance					18,700
	Add Collections from customers					209,350
	total cash available					228,050
	less Cash disbursements
	purchase of inventoru					121,050
	selling and administrative expense					85,500
	purchase of Equipment					16,300
	total cash disbursements					222,850
	Excess of cash available over disbursements					5,200
	financing:
	borrowing -note					24,500
	Repayments-note					-13,700
	interest					-390
	total financing					10,410
	Ending cash balance					15,610
	Budgeted income statement
	sales					214,000
	cost of goods sold:
	beginning inventory				41,250
	purchases				122,000
	goods available for sale				163,250
	ending invnetory				47,500
	cost of goods sold:					115,750
	Gross margin					98,250
	Selling and administrative expesne					87,550
	net operating income					10,700
	interest expesne					390
	net income					10,310
	Budgeted balance sheet
	Assets
	Cash					15,610
	Account receivable					74900
	inventory					47,500
	buildings & equipment,net of depreciaiton					244250
	(232000+8800-5000)
	total Assets					382,260
	Laibilities & stockholder's Equity
	Accounts payable					73200
	note payable					24,500
	common stock					180,000
	Retained earnings					104,560
	total liabilities & stockholders equity					382260