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 80% in the month of sale and 20% in the month following the sale.

The cost of goods sold is 69% of sales.

The company desires an ending merchandise inventory equal to 70% 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 $22,300.

Monthly depreciation is $22,100.

Ignore taxes.

Balance Sheet October 31
Assets
Cash	$	23,100
Accounts receivable		84,100
Merchandise inventory		169,050
Property, plant and equipment (net of $605,000 accumulated depreciation)		1,015,000
Total assets	$	1,291,250
Liabilities and Stockholders' Equity
Accounts payable	$	197,100
Common stock		950,000
Retained earnings		144,150
Total liabilities and stockholders' equity	$	1,291,250

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

Solution:

Part 1 --- Expected Cash Collections

Schedule of Expected Cash Collections for November and December
	November	December
Accounts Receivable, beginning	$84,100
November Sales	$280,000	$70,000
December Sales		288000
Total Expected Cash Collections	$364,100	$358,000

Part 2 – merchandise Purchase Budget

	November	December	January
Cost of Goods Sold (Sales * 69%)	$241,500	$255,300	$248,400
Plus: Desired Ending Inventory	$178,710	$173,880
Total Needs	$420,210	$429,180
Less: Estimated Beginning Inventory	$169,050	$178,710
Merchandise to be purchased	$251,160	$250,470

Part 3 – Cash Budget

	November	December
Beginning Cash Balance	$23,100	$167,800
Add: Cash Collection from Customers	$364,100	$358,000
Total Cash Available	$387,200	$525,800
Less: Cash disbursements
for merchandise purchases	$197,100	$251,160
Other Expenses	$22,300	$22,300
Total Cash Disbursements	$219,400	$273,460
Ending Cash Balance	$167,800	$252,340

Part 4 – Income Statement

	November	December
Sales Revenue	$350,000	$370,000
Cost of Goods Sold	$241,500	$255,300
Gross Profit	$108,500	$114,700
Other Expense	$22,300	$22,300
Depreciation	$22,100	$22,100
Operating Profit	$64,100	$70,300

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Pls ask separate question for remaining parts.