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Question: Welnor Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data...

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Welnor Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow:

•	Sales are budgeted at $370,000 for November, $390,000 for December, and $380,000 for January.
•	Collections are expected to be 80% in the month of sale, 16% in the month following the sale, and 4% uncollectible.
•	The cost of goods sold is 74% of sales.
•	The company desires ending merchandise inventory to equal 80% of the following month's cost of goods sold. Payment for merchandise is made in the month following the purchase.
•	Other monthly expenses to be paid in cash are $21,500.
•	Monthly depreciation is $16,500.
•	Ignore taxes.

Balance Sheet October 31
Assets
Cash	$	22,500
Accounts receivable (net of allowance for uncollectible accounts)		82,500
Merchandise Inventory		219,040
Property, plant and equipment (net of $663,000 accumulated depreciation)		1,170,000
Total assets	$	1,494,040
Liabilities and Stockholders’ Equity
Accounts payable	$	199,500
Common stock		890,000
Retained earnings		404,540
Total liabilities and stockholders’ equity	$	1,494,040

Required:

a.	Prepare a Schedule of Expected Cash Collections for November and December. (Omit the "$" sign in your response.)

Welnor Industrial Gas Corporation Schedule of Expected Cash Collections
	November	December
Sales	$	$
Schedule of Expected Cash Collections
Accounts receivable	$
November sales		$
December sales
Total cash collections	$	$

b.	Prepare a Merchandise Purchases Budget for November and December. (Input all amounts as positive values. Do not round intermediate calculations. Omit the "$" sign in your response.)

Welnor Industrial Gas Corporation Merchandise Purchases Budget
	November	December
Budgeted cost of goods sold	$	$
(Click to select)AddDeduct: (Click to select)Beginning merchandise inventoryDesired ending merchandising inventory
Total needs
(Click to select)DeductAdd: (Click to select)Beginning merchandise inventoryDesired ending merchandising inventory
Required purchase	$	$

c.	Prepare Cash Budgets for November and December. (Leave no cells blank - be certain to enter "0" wherever required. Input all amounts as positive values. Omit the "$" sign in your response.)

Welnor Industrial Gas Corporation Cash Budget
	November	December
Cash disbursements for merchandise	$	$
Other monthly cash expenses
Total cash disbursements	$	$
Cash balance, beginning	$	$
Add cash receipts
Total cash available
Less cash disbursement
Excess (deficiency) of cash available   over disbursements
Financing
Cash balance, ending	$	$

d.	Prepare Budgeted Income Statements for November and December. (Input all amounts as positive values. Omit the "$" sign in your response.)

Welnor Industrial Gas Corporation Budgeted Income Statement
	November	December
(Click to select)SalesCost of goods soldDepreciationNet operating incomeOther monthly expensesBad debt expenseGross margin	$	$
(Click to select)DepreciationNet operating incomeGross marginAccounts payableSalesOther monthly expensesCost of goods sold
(Click to select)Net operating incomeAccounts payableSalesDepreciationOther monthly expensesGross marginCost of goods sold
(Click to select)Cost of goods soldBad debt expenseNet operating incomeOther monthly expensesDepreciationSalesGross margin
(Click to select)Net operating incomeOther monthly expensesBad debt expenseInventoryGross marginSalesCost of goods sold
(Click to select)Net operating incomeSalesBad debt expenseInventoryDepreciationCost of goods soldGross margin
(Click to select)DepreciationBad debt expenseNet operating incomeCost of goods soldGross marginSalesOther monthly expenses	$	$

e.	Prepare a Budgeted Balance Sheet for the end of December. (Be sure to enter your answers in the order of liquidity. Input all amounts as positive values. Omit the "$" sign in your response.)

Welnor Industrial Gas Corporation Budgeted Balance Sheet December 31
Assets
(Click to select)InventoryAccounts receivableCashProperty, plant and equipment
(Click to select)InventoryCashProperty, plant and equipmentAccounts receivable
(Click to select)InventoryAccounts receivableProperty, plant and equipmentCash
(Click to select)Accounts receivableInventoryCashProperty, plant and equipment
Total assets
Liabilities and Stockholders’ Equity
(Click to select)Retained earningsCommon stockAccounts payableCash
(Click to select)CashCommon stockInventoryAccounts payable
(Click to select)InventoryAccounts payableCashRetained earnings
Total liabilities and stockholders’ equity

Answer 1

Answer a.
Welnor Industrial Gas Corporation
Schedule of Expected Cash Collections
	Nov.	Dec.
Sales	370,000	390,000
Schedule of Expected Cash Collections
Accounts Receivables	82,500
Nov. sales	296,000	59,200
Dec Sales		312,000
Total Cash Collections	378,500	371,200
Answer b.
Welnor Industrial Gas Corporation
Merchandise Purchase Budget
	Nov.	Dec.
Budgeted Cost of Goods Sold (74%)	273,800	288,600
Add: Closing merchandise inventory	230,880	224,960
Total Needs	504,680	513,560
Deduct: Beginning Merchandise inventory	(219,040)	(230,880)
Required Purchases	285,640	282,680
Answer c.
Welnor Industrial Gas Corporation
Cash Budget
	Nov.	Dec.
Cash Disbursements for merchandise	199,500	285,640
Other monthly cash expenses	21,500	21,500
Total Cash Disbursements	221,000	307,140
Cash Balance, Beginning	22,500	180,000
Add: Cash Receipts	378,500	371,200
Total Cash Available	401,000	551,200
Less: cash disbursements	(221,000)	(307,140)
Excess (deficiency) of cash available over disbursements	180,000	244,060
Financing	-	-
Cash Balance, ending	180,000	244,060
Answer d.
Welnor Industrial Gas Corporation
Budgeted Income Statement
	Nov.	Dec.
Sales	370,000	390,000
Less: Cost of Goods Sold	(273,800)	(288,600)
Gross Margin	96,200	101,400
Less: Expenses
Monthly Cash Expenses	(21,500)	(21,500)
Depreciation	(16,500)	(16,500)
Bad debts	(14,800)	(15,600)
Net Income	43,400	47,800
Answer e.
Welnor Industrial Gas Corporation
Budgeted Balance Sheet
December 31
Assets
Cash	244,060
Accounts Receivables (Net of allowance)	62,400
Merchandise Inventory	224,960
Property, plant & equipment (net of accumulated dep.)	1,137,000
Total Assets	1,668,420
Liabilities and Stockholders' Equity
Accounts Payable	282,680
Common Stock	890,000
Retained Earnings	495,740
Total Liabilities and Stockholders' Equity	1,668,420