Homework #5
Minden Company is a wholesale distributor of premium European chocolates. The company’s balance sheet as of April 30 is given below:
Minden Company
Balance Sheet
April 30
Assets
Cash $ 9,000
Accounts receivable 54,000
Inventory 30,000
Buildings and equipment, net of depreciation 207,000
Total assets $ 300,000
Liabilities and Stockholders’ Equity
Accounts payable $ 63,000
Note payable 14,500
Common stock 180,000
Retained earnings 42,500
Total liabilities and stockholders’ equity $ 300,000
The company is in the process of preparing a budget for May and has assembled the following data:
a. Sales are budgeted at $200,000 for May. Of these sales, $60,000 will be for cash; the remainder will be credit sales. One-half of a
month’s credit sales are collected in the month the sales are made, and the remainder is collected in the following month. All of the
April 30 accounts receivable will be collected in May.
. Purchases of inventory are expected to total $120,000 during May. These purchases will all be on account. Forty percent of all
purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the April 30 accounts payable
to suppliers will be paid during May.
c. The May 31 inventory balance is budgeted at $40,000.
d. Selling and administrative expenses for May are budgeted at $72,000, exclusive of depreciation. These expenses will be paid in
cash. Depreciation is budgeted at $2,000 for the month.
e. The note payable on the April 30 balance sheet will be paid during May, with $100 in interest. (All of the interest relates to May.)
f. New refrigerating equipment costing $6,500 will be purchased for cash during May.
g. During May, the company will bo
ow $20,000 from its bank by giving a new note payable to the bank for that amount. The new note
will be due in one year.
Required:
1-a. Prepare a schedule of expected cash collections from sales and a schedule of expected cash disbursements for merchandise
purchases..
Schedule of Expected Cash Collections
Cash sales—May
Collections on account receivable:
April 30 balance
May sales
Total cash receipts
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Schedule of Expected Cash Disbursements
April 30 accounts payable balance
May purchases
Total cash payments
1-b. Prepare a cash budget for May. (Cash deficiency, repayments and interest should be indicated by a minus sign.)
Minden Company
Cash Budget
For the Month of May
Beginning cash balance
Add collections from customers
Total cash available
Less cash disbursements:
Purchase of inventory
Selling and administrative expenses
Purchases of equipment
Total cash disbursements
Excess (deficiency) of cash available over disbursements
Financing:
Bo
owing—note
Repayments—note
Interest
Total financing
Ending cash balance
2. Prepare a budgeted income statement for May.
Minden Company
Budgeted Income Statement
For the Month of May
Cost of goods sold:
3. Prepare a budgeted balance sheet as of May 31.
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Minden Company
Budgeted Balance Sheet
May 31
Assets
Total assets
Liabilities and Stockholders’ Equity
Total liabilities and stockholders’ equity
ev: 04_01_2019_QC_CS-164472
Financial Statements Learning Objective: 09-04
Prepare a direct materials
udget, including a schedule
of expected cash
disbursements for purchases
of materials.
Learning Objective: 09-10 Prepare a budgeted balance
sheet.
Difficulty: 1 Easy Learning Objective: 09-08
Prepare a cash budget.
Learning Objective:
09-02 Prepare a sales
udget, including a
schedule of expected
cash collections.
Learning Objective: 09-09
Prepare a budgeted income
statement.
Check my work
eBook & ResourcesReferences
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Minden Company is a wholesale distributor of premium European chocolates. The company’s balance sheet as of April 30 is given below:
Minden Company
Balance Sheet
April 30
Assets
Cash $ 9,000
Accounts receivable 54,000
Inventory 30,000
Buildings and equipment, net of depreciation 207,000
Total assets $ 300,000
Liabilities and Stockholders’ Equity
Accounts payable $ 63,000
Note payable 14,500
Common stock 180,000
Retained earnings 42,500
Total liabilities and stockholders’ equity $ 300,000
The company is in the process of preparing a budget for May and has assembled the following data:
a. Sales are budgeted at $220,000 for May. Of these sales, $60,000 will be for cash; the remainder will be credit sales. Each month’s
credit sales are collected 60% in the month of sale and 40% in the month following the sale. All of the April 30 accounts receivable
will be collected in May.
. Purchases of inventory are expected to total $120,000 during May. These purchases will all be on account. The company pays fo
50% of its merchandise purchases in the month of the purchase and the remaining 50% in the month following the purchase. All of
the April 30 accounts payable to suppliers will be paid during May.
c. The May 31 inventory balance is budgeted at $40,000.
d. Selling and administrative expenses for May are budgeted at $72,000, exclusive of depreciation. These expenses will be paid in
cash. Depreciation is budgeted at $2,000 for the month.
e. The note payable on the April 30 balance sheet will be paid during May, with $100 in interest. (All of the interest relates to May.)
f. New refrigerating equipment costing $6,500 will be purchased for cash during May.
g. During May, the company will bo
ow $20,000 from its bank by giving a new note payable to the bank for that amount. The new note
will be due in one year.
Required:
1-a. Prepare a schedule of expected cash collections from sales and a schedule of expected cash disbursements for merchandise
purchases.
Schedule of Expected Cash Collections
Cash sales—May
Collections on account receivable:
April 30 balance
May sales
Total cash receipts
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Schedule of Expected Cash Disbursements
April 30 accounts payable balance
May purchases
Total cash payments
1-b. Prepare a cash budget for May. (Cash deficiency, repayments and interest should be indicated by a minus sign.)
Minden Company
Cash Budget
For the Month of May
Beginning cash balance
Add collections from customers
Total cash available
Less cash disbursements:
Purchase of inventory
Selling and administrative expenses
Purchases of equipment
Total cash disbursements
Excess (deficiency) of cash available over disbursements
Financing:
Bo
owing—note
Repayments—note
Interest
Total financing
Ending cash balance
2. Prepare a budgeted income statement for May.
Minden Company
Budgeted Income Statement
For the Month of May
Cost of goods sold:
3. Prepare a budgeted balance sheet as of May 31.
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Minden Company
Budgeted Balance Sheet
May 31
Assets
Total assets
Liabilities and Stockholders’ Equity
Total liabilities and stockholders’ equity
Financial Statements Learning Objective: 09-04
Prepare a direct materials
udget, including a schedule
of expected cash
disbursements for purchases
of materials.
Learning Objective: 09-10 Prepare a budgeted balance
sheet.
Difficulty: 1 Easy Learning Objective: 09-08
Prepare a cash budget.
Learning Objective:
09-02 Prepare a sales
udget, including a
schedule of expected
cash collections.
Learning Objective: 09-09
Prepare a budgeted income
statement.
Check my work
eBook & ResourcesReferences
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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 $40,000.
. Actual sales for October and November and expected sales for December are as follows:
October November Decembe
Cash sales $ 65,000 $ 70,000 $ 83,000
Sales on account 400,000 525,000 600,000
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 $280,000 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 $161,000, all of which will be paid in
December.
d. Selling and administrative expenses are budgeted at $430,000 for December. Of this amount, $50,000 is for depreciation.
e. A new web server for the Marketing Department costing $76,000 will be purchased for cash during December, and dividends
totaling $9,000 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 bolste
the cash position as needed.
Required:
1. Prepare a schedule of expected cash collections for December.
Schedule of Expected Cash Collections
December cash sales
Collections on account:
October sales
November sales
December sales
Total cash collections
2. Prepare a schedule of expected cash disbursements for merchandise purchases for December.
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Schedule of Expected Cash Disbursements
Payments to suppliers:
November purchases
December purchases
Total cash payments
3. Prepare a cash budget for December. Indicate in the financing section any bo
owing 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 Decembe
Beginning cash balance
Add collections from customers
Total cash available
Less cash disbursements:
Payments to suppliers for inventory
Selling and administrative expenses
New web serve
Dividends paid
Total cash disbursements
Excess (deficiency) of cash available over disbursements
Financing:
Bo
owings
Repayments
Interest
Total financing
Ending cash balance
Worksheet Learning Objective: 09-02
Prepare a sales budget,
including a schedule of
expected cash collections.
Learning Objective: 09-08 Prepare a cash budget.
Difficulty: 1 Easy Learning Objective: 09-04
Prepare a direct materials
udget, including a schedule
of expected cash
disbursements for purchases
of materials.
Check my work
eBook & ResourcesReferences
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The president of the retailer Prime Products has just approached the company’s bank with a request for a $30,000, 90-day loan. The purpose of
the loan is to assist the company in acquiring inventories. Because the company has had some difficulty in paying off its loans in the past, the
loan officer has asked for a cash budget to help determine whether the loan should be made. The following data are available for the months
April through June, during which the loan will be used:
a. On April 1, the start of the loan period, the cash balance will be $24,000. Accounts receivable on April 1 will total $140,000, of which
$120,000 will be collected during April and $16,000 will be collected during May. The remainder will be uncollectible.
. Past experience shows that 30% of