Question

Minden Company is a wholesale distributor of premium European chocolates. The company’s balance sheet on April 30 is as follows:

MINDEN COMPANY Balance Sheet April 30
Assets
Cash	$	11,400
Accounts receivable, customers		57,000
Inventory		31,800
Buildings and equipment, net of depreciation		219,000
Total assets	$	319,200
Liabilities and Shareholders’ Equity
Accounts payable, suppliers	$	66,600
Note payable		15,700
Capital shares, no par		192,000
Retained earnings		44,900
Total liabilities and shareholders’ equity	$	319,200

The company is in the process of preparing budget data for May. A number of budget items have already been prepared, as follows:

a.	Sales are budgeted at $320,000 for May. Of these sales, $96,000 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 are collected in the following month. All of the April 30 receivables will be collected in May.
b.	Purchases of inventory are expected to total $192,000 during May. These purchases will all be on account. 40% 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 $64,000.
d.	Operating expenses for May are budgeted at $115,200, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $3,200 for the month.
e.	The note payable on the April 30 balance sheet will be paid during May, with $100 in interest. (All of the interest relates to May.)
f.	New refrigerating equipment costing $7,700 will be purchased for cash during May.
g.	During May, the company will borrow $32,000 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.	Prepare a cash budget for May. (Any "Repayments" and "Interest" should be indicated by a minus sign.)

      

2.	Prepare a budgeted income statement for May.

       

3.	Prepare a budgeted balance sheet as of May 31.

      

Answer 1

MINDEN COMPANY Cash Budget For The Month Ended May
Beginning cash balance	$11,400
Cash receipts:
Cash sales	96,000
Cash collections (57,000+112,000)	169,000
Total cash available	276,400
Cash disbursements:
Cash payment for purchases (66,600+76,800 (192,000*40%)	143,400
Cash payment for operating expenses	115,200
Cash purchase of equipment	7,700
Total cash disbursements	266,300
Cash excess (deficit)	10,100
Financing:
Borrowing	32,000
Repayment:
Principal	-15,700
Interest	-100
Total Financing	16,200
Ending cash balance	$26,300

MINDEN COMPANY Income Statement For The Month Ended May 31
Sales revenue	$320,000
Less: Cost of goods sold (31,800+192,000-64,000)	159,800
Gross profit	160,200
Less: Expenses (115,200+3,200)	118,400
Operating income	41,800
Other expenses:
Interest expense	100
Net income	$41,700

MINDEN COMPANY Balance Sheet May 31
Assets
Cash	$26,300
Accounts receivable, customer (320,000-96,000)*50%	112,000
Inventory	64,000
Building and equipment, net of depreciation (219,000+7,700-3,200)	223,500
Total assets	425,800
Liabilities and shareholder's equity
Accounts payable, supplier (192,000*60%)	115,200
Notes payable	32,000
Capital shares, no par	192,000
Retained earnings (44,900+41,700)	86,600
Total liabilities and shareholder's equity	$425,800