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 78% of sales.

The company desires an ending merchandise inventory equal to 80% 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 $20,400.

Monthly depreciation is $20,200.

Ignore taxes.

Balance Sheet October 31

Assets Cash $ 21,200

Accounts receivable 82,200

Merchandise inventory 218,400

Property, plant and equipment (net of $588,000 accumulated depreciation) 998,000

Total assets $ 1,319,800

Liabilities and Stockholders' Equity

Accounts payable $ 195,200

Common stock 530,000

Retained earnings 594,600

Total liabilities and stockholders' equity $ 1,319,800

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