Question

Weldon 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, 18% in the month following the sale, and 2% uncollectible. • The cost of goods sold is 72% 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 $21,300. • Monthly depreciation is $16,300. • Ignore taxes. Balance Sheet October 31 Assets Cash $ 22,300 Accounts receivable (net of allowance for uncollectible accounts) 82,300 Merchandise Inventory 201,600 Property, plant and equipment (net of $661,000 accumulated depreciation) 1,170,000 Total assets $ 1,476,200 Liabilities and Stockholders’ Equity Accounts payable $ 199,300 Common stock 870,000 Retained earnings 406,900 Total liabilities and stockholders’ equity $ 1,476,200 Required: a. Prepare a Schedule of Expected Cash Collections for November and December. b. Prepare a Merchandise Purchases Budget for November and December. (Input all amounts as positive values. Do not round intermediate calculations.) c. Prepare Cash Budgets for November and December. (Input all amounts as positive values.) d. Prepare Budgeted Income Statements for November and December. e. Prepare a Budgeted Balance Sheet for the end of December.

Answer 1

1	Shedule of expected cash collection
	Particulars	Novermber $	December $
	Collection from October Sales	82,300	-
	Collection from November Sales	280,000	63,000
	Collection from December Sales	-	296,000
	Total Cash Collection	362,300	359,000
2	Merchendise Purchase Budget
	Particulars	Novermber $	December $
	Merchendise Purchase Budget
	Enidng Inventory	213,120	207,360
	Add : Sales	350,000	370,000
	Less : Begning Inventory	201,600	213,120
	Total Purchases	361,520	364,240
	Enidng Inventory	Novermber $	December $
	Cost of goods sold for next month	266,400	259,200
	(80% of COGS)	213,120	207,360
3	Cash Budget
	Particulars	Novermber $	December $
	Cash Receipt	362,300	359,000
	Cash Disbursement
	Cash Disbursement for merchendise	199,300	361,520
	Other Monthly Expenses	21,300	21,300
	Total Cash Disbursement	220,600	382,820
	Excess (deficiency ) of cash available over disbursements	141,700	(23,820)
4	Budgeted Income Statement
	Particulars	Novermber $	December $
	Sales	350,000	370,000
	Bad debts expenses	7,000	7,400
	Cost of Goods sold	252,000	266,400
	Gross Margin	91,000	96,200
	Other Monthly Expenses	21,300	21,300
	Depreciation	16,300	16,300
	Net Operating Income	53,400	58,600
5	Budgeted Balancesheet
	Assets	December $
	Cash	341,780
	Accounts Receivable (Net of allowance for uncollectble accounts)	66,600
	Inventory	207,360
	Property Palnt and equipment(Net of $693600 accumulated depreciation)	1,137,400
	Total Assets	1,753,140
	Liability and stock holders equity
	Accounts Payable	364,240
	Common Stock	870,000
	Retained Earnings	518,900
	Total Liability and stock holders equity	1,753,140	-