Question

Exercise 7-9 Budgeted Balance Sheet [LO7-10]

The management of Mecca Copy, a photocopying center located on University Avenue, has compiled the following data to use in preparing its budgeted balance sheet for next year:

	Ending Balances
Cash		?
Accounts receivable	$	9,500
Supplies inventory	$	3,400
Equipment	$	41,000
Accumulated depreciation	$	16,600
Accounts payable	$	3,200
Common stock	$	5,000
Retained earnings		?

The beginning balance of retained earnings was $31,000, net income is budgeted to be $21,400, and dividends are budgeted to be $3,900.

Required:

Prepare the company’s budgeted balance sheet. (Amounts to be deducted should be indicated by a minus sign.)

	Mecca Copy Budgeted Balance Sheet Assets Current assets: Total current assets $0 Plant and equipment: Plant and equipment, net 0 Total assets $0 Liabilities and Stockholders' Equity Current liabilities: Stockholders' equity: Total stockholders' equity 0 Total liabilities and stockholders' equity $0

Problem 7-19A Schedules of Expected Cash Collections and Disbursements [LO7-2, LO7-4, LO7-8]

You have been asked to prepare a December cash budget for Ashton Company, a distributor of exercise equipment. The following information is available about the company’s operations:

a.	The cash balance on December 1 is $47,000.
b.	Actual sales for October and November and expected sales for December are as follows:

	October		November		December
Cash sales	$	83,000	$	79,000	$	85,600
Sales on account		500,000		624,000		674,000

   

	Sales on account are collected over a three-month period as follows: 20% collected in the month of sale, 60% collected in the month following sale, and 18% collected in the second month following sale. The remaining 2% is uncollectible.
c.	Purchases of inventory will total $372,000 for December. Thirty percent of a month’s inventory purchases are paid during the month of purchase. The accounts payable remaining from November’s inventory purchases total $189,500, all of which will be paid in December.
d.	Selling and administrative expenses are budgeted at $502,000 for December. Of this amount, $69,000 is for depreciation.
e.	A new web server for the Marketing Department costing $88,500 will be purchased for cash during December, and dividends totaling $14,500 will be paid during the month.
f.	The company maintains a minimum cash balance of $20,000. An open line of credit is available from the company’s bank to bolster the cash position as needed.

Required:
1.	Prepare a schedule of expected cash collections for December.

  

Ashton Company Schedule of Expected Cash Collections December cash sales Collections on account: October sales November sales December sales Total cash collections $0 2. Prepare a schedule of expected cash disbursements for merchandise purchases for December. Ashton Company Schedule of Expected Cash Disbursements Payments to suppliers: November purchases December purchases Total cash payments $0 3. Prepare a cash budget for December. Indicate in the financing section any borrowing that will be needed during the month. Assume that any interest will not be paid until the following month. Ashton Company Cash Budget For the Month of December Beginning cash balance Add collections from customers Total cash available 0 Less cash disbursements: Payments to suppliers for inventory Selling and administrative expenses New web server Dividends paid Total cash disbursements 0 Excess (deficiency) of cash available over disbursements 0 Financing: Borrowings Repayments Interest Total financing 0 Ending cash balance $0

Answer 1

Mecca Copy
Budgeted Balance Sheet
Assets
Current assets:
Cash	19400
Accounts receivable	9500
Supplies inventory	3400
Total current assets		32300
Plant and equipment:	41000
Less: Accumulated depreciation	16600
Plant and equipment, net		24400
Total assets		56700
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	3200
Total current liabilities		3200
Stockholders' equity:
Common stock	5000
Retained earnings = 31000+21400-3900 =	48500
Total stockholders' equity		53500
Total liabilities and stockholders' equity		56700
Note: Cash balance = Total liabilities and equity-Plant and equipment net-Supplies inventory-Accounts receivable = 56700-24400-9500-3400 =	19400
Ashton Company
Schedule of Expected Cash Collections
December cash sales	85600
Collections on account:
October sales	90000
November sales	374400
December sales	134800
Total cash collections	684800
Ashton Company
Schedule of Expected Cash Disbursements
Payments to suppliers:
November purchases	189500
December purchases	111600
Total cash payments	301100
Ashton Company
Cash Budget
For the Month of December
Beginning cash balance		47000
Add collections from customers		684800
Total cash available		731800
Less: Cash disbursements:
Payments to suppliers for inventory	301100
Selling and administrative expenses	433000
New web server	88500
Dividends paid	14500
Total cash disbursements		837100
Excess (deficiency) of cash available over disbursements		-105300
Financing:
Borrowings		125300
Repayments		0
Interest		0
Total financing		125300
Ending cash balance		20000