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	$	7,000
Accounts receivable		83,000
Inventory		32,000
Buildings and equipment, net of depreciation		610,000
Total assets	$	732,000
Liabilities and Stockholders' Equity
Accounts payable	$	111,000
Note payable		26,000
Capital stock		530,000
Retained earnings		65,000
Total liabilities and stockholders' equity	$	732,000

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

a.	Sales are budgeted at $370,000 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 $310,000 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 $50,000 .
d.	Selling and administrative expenses for June are budgeted at $52,000 , exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $3,100 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 $5,000 will be purchased for cash during June.
g.	During June, the company will borrow $29,000 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.

Answer 1

1(a) Schedule of Expected cash collection
Cash sales in June	$65,000
Collection on accounts receivables:
May 31 balance	$83,000
June ((370000-65000)*1/2)	$152,500
Total cash receipts	$300,500
Schedule of Expected cash Disbursements
May 31 accounts payable balance	$111,000
June purchases (310000*40%)	$124,000
Total cash Payments	$235,000

1(b)Cash Budget
For the month of June
Cash balance, begning	$7,000
Add receipts from customers	$300,500
Total cash available	$307,500
Less Disbursements:
Purchase of inventory	$235,000
Selling & Administrative expenses	$52,000
Purchase of equipment	$5,000
Total cash disbursements	$292,000
Excess of receipts over disbursements	$15,500
Financing:
Borrowings - note	$29,000
Repayments - note	-$26,000
Interest	-$700
Total financing	$2,300
Cash balance, ending	$17,800

Snapshot, Inc.
Budgeted Income statement
For the month of June
Sales Revenue	$370,000
Cost of goods sold (32000+310000-50000)	$292,000
Selling & Administrative expenses	$52,000
Depreciation expenses	$3,100
Interest expenses	$700
Total expenses	$347,800
Net Income	$22,200

Snapshot, Inc.
Budgeted Balance sheet at the month end on 30 June
Assets
Cash	$17,800
Accounts receivables	$152,500
Inventory	$50,000
Buildings & Equipments net of depreciation	$611,900
(610000+5000-3100)
Total assets	$832,200
Liabilities & stockholder's equity
Accounts payable	$186,000
Note payable	$29,000
Capital stock	$530,000
Retained earnings (65000+22200)	$87,200
Liabilities & equity	$832,200