In: Accounting
Ch 8 algo 1 Exercise 8-18 (REV) Cash Flows; Budgeted Income Statement and Balance Sheet [LO8-2, LO8-3, LO8-9, LO8-10]
Wolfpack Company is a merchandising company that is preparing a budget for the month of July. It has provided the following information:
Wolfpack Company Balance Sheet June 30 |
||
Assets | ||
Cash | $ | 83,600 |
Accounts receivable | 69,600 | |
Inventory | 44,200 | |
Buildings and equipment, net of depreciation | 158,000 | |
Total assets | $ | 355,400 |
Liabilities and Stockholders’ Equity | ||
Accounts payable | $ | 37,400 |
Common stock | 100,000 | |
Retained earnings | 218,000 | |
Total liabilities and stockholders’ equity | $ | 355,400 |
Budgeting Assumptions:
All sales are on account. Thirty percent of the credit sales are collected in the month of sale and the remaining 70% are collected in the month subsequent to the sale. The accounts receivable at June 30 will be collected in July.
All merchandise purchases are on account. Twenty percent of merchandise inventory purchases are paid in the month of the purchase and the remaining 80% is paid in the month after the purchase.
The budgeted inventory balance at July 31 is $36,600.
Depreciation expense is $3,160 per month. All other selling and administrative expenses are paid in full in the month the expense is incurred.
The company’s cash budget for July shows expected cash collections of $98,400, expected cash disbursements for merchandise purchases of $47,400, and cash paid for selling and administrative expenses of $16,040.
Required:
1. For the month of July, calculate the following:
a. Budgeted sales
b. Budgeted merchandise purchases
c. Budgeted cost of goods sold
d. Budgeted net operating income
2. Prepare a budgeted balance sheet as of July 31.
Budgeted Sales |
||
July 30. |
||
(A) |
Total Cash Collections |
$ 98,400.00 |
(B) |
Less: Amount of june |
$ 69,600.00 |
(C ) |
Collection for July sales |
$ 28,800.00 |
(D) |
%of sales collection in current month |
30% |
(C/D) |
Total Sales of July |
$ 96,000.00 |
Budgeted Purchases |
||
July 30. |
||
(A) |
Total Cash Disbursement for merchandise purchase |
$ 47,400.00 |
(B) |
Less: payment for June |
$ 37,400.00 |
(C ) |
Payment for july purchase |
$ 10,000.00 |
(D) |
% of Payment for purchase made in same month |
20% |
(C/D) |
Total Purchase for July |
$ 50,000.00 |
Budgeted Cost of Goods Sold |
|
Opening Inventory |
$ 44,200.00 |
Purchases during Month |
$ 50,000.00 |
Goods Available for sale |
$ 94,200.00 |
Less: Closing Inventory |
$ 36,600.00 |
CoGS |
$ 57,600.00 |
Budgeted net Operating income |
|
sales revenue |
$ 96,000.00 |
Less: CoGS |
$ 57,600.00 |
Gross Profit |
$ 38,400.00 |
Operating expenses |
|
Depreciation |
$ 3,160.00 |
Selling and Administrative expenses |
$ 16,040.00 |
Net Operating income |
$ 19,200.00 |
Budgeted Balance Sheet |
|
Assets |
|
Cash* |
$ 118,560.00 |
Accounts Receivables(70% of sales) |
$ 67,200.00 |
Inventory |
$ 36,600.00 |
Buildings and equipment, net of depreciation |
$ 154,840.00 |
Total Assets |
$ 377,200.00 |
Liabilities and Stockholders’ Equity |
|
Accounts Payable(80% of Purchases) |
$ 40,000.00 |
Common Stock |
$ 100,000.00 |
Retained Earnings |
$ 237,200.00 |
Total liabilities and stockholders’ equity |
$ 377,200.00 |
*Cash balance $83600+98400-47400-16040