Question

The balance sheet of Snapshot, Inc., a distributor of photographic supplies, as of May 31 is given below:

Snapshot, Inc. Balance Sheet May 31
Assets
Cash	$	6,000
Accounts receivable		90,000
Inventory		38,000
Buildings and equipment, net of depreciation		680,000
Total assets	$	814,000
Liabilities and Stockholders' Equity
Accounts payable	$	81,000
Note payable		33,000
Capital stock		600,000
Retained earnings		100,000
Total liabilities and stockholders' equity	$	814,000

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

a.	Sales are budgeted at $440,000 for June. Of these sales, $65,000 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 is collected the following month. All of the May 31 accounts receivable will be collected in June.
b.	Purchases of inventory are expected to total $350,000 during June. These purchases will all be on account. Forty percent of all inventory purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the May 31 accounts payable to suppliers will be paid during June.
c.	The June 30 inventory balance is budgeted at $40,000 .
d.	Selling and administrative expenses for June are budgeted at $77,000 , exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $3,800 for the month.
e.	The note payable on the May 31 balance sheet will be paid during June. The company’s interest expense for June (on all borrowing) will be $700 , which will be paid in cash.
f.	New warehouse equipment costing $13,000 will be purchased for cash during June.
g.	During June, the company will borrow $36,000 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:
1a.	Prepare schedule of expected cash collections from sales and a schedule of expected cash disbursements for inventory purchases.

        

       

1b.	Prepare a cash budget for June.

     

2.	Prepare a budgeted income statement for June using the absorption costing income statement format.

      

3.	Prepare a budgeted balance sheet as of June 30.

please complete all parts of problems <3

Answer 1

1a) Schedule of Expected Cash collections from sales (Amts in $)

Cash Sales	65,000
Collection for Accounts Receivable of May [($440,000-$65,000)*1/2]	187,500
Collection for credit sales in June	90,000
Total expected cash collections	342,500

Schedule of Expected Cash Disbursements for inventory (Amounts in $)

Payment for Accounts Payable of May	81,000
Payment for purchases in June ($350,000*40%)	140,000
Total expected cash disbursements for inventory purchases	221,000

1b) Cash Budget for June (Amounts in $)

Beginning Cash Balance	6,000
Add: Expected Cash Collections from Sales	342,500
Less: Expected Cash Disbursements for inventory purchases	(221,000)
Less: Selling and Administrative expenses paid in cash	(77,000)
Less: Purchase of Equipment	(13,000)
Cash Balance after above receipts and payments	37,500
Financing:
Less: Repayment of outstanding Notes Payable	(33,000)
Less: Payment of interest expense	(700)
Add: Borrowing of long term Notes Payable	36,000
Ending Cash Balance	39,800

2) Budgeted Income Statement for June (Amts in $)

Sales	440,000
Less: Cost of goods Sold (Beg. Inv.+Purchases-Ending Inv.) (38,000+350,000-40,000)	(348,000)
Gross Profit	92,000
Less: Operating Expenses
Selling and Administrative Expenses	(77,000)
Depreciation	(3,800)
Interest Expense	(700)
Net Operating Income	10,500

3) Snapshot, Inc.

Budgeted Balance Sheet as of June 30 (Amts in $)

Assets
Cash	39,800
Accounts Receivable [($440,000-$65,000)*1/2]	187,500
Inventory	40,000
Buildings and equipment, net of depreciation (680,000+13,000-3,800)	689,200
Total Assets	956,500
Liabilities and Stockholder's Equity
Accounts Payable ($350,000*60%)	210,000
Note Payable	36,000
Capital Stock	600,000
Retained Earnings ($100,000+10,500)	110,500
Total Liabilities and Stockholders' Equity	956,500