Question

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

• Sales are budgeted at $350,000 for November, $370,000 for December, and $360,000 for January.
• Collections are expected to be 75% in the month of sale and 25% in the month following the sale.
• The cost of goods sold is 74% 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 $20,800.
• Monthly depreciation is $20,600.
• Ignore taxes.

Balance Sheet October 31
Assets
Cash	$	21,600
Accounts receivable		82,600
Merchandise inventory		181,300
Property, plant and equipment (net of $592,000 accumulated depreciation)		1,002,000
Total assets	$	1,287,500
Liabilities and Stockholders' Equity
Accounts payable	$	195,600
Common stock		570,000
Retained earnings		521,900
Total liabilities and stockholders' equity	$	1,287,500

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

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