Reference no: EM132453957
Problem - Deacon Company is a merchandising company that is preparing a budget for the three-month period ended June 30th. The following information is available
Deacon Company Balance Sheet March 31
Assets Cash $62,000
Accounts receivable 43,600
Inventory 46,000
Buildings and equipment, net of depreciation 107,000
Total assets $258,600
Liabilities and Stockholders' Equity
Accounts payable $63,600
Common stock 70,000
Retained earnings 125,000
Total liabilities and stockholders' equity $258,600
Budgeted Income Statements -
|
|
April
|
May
|
June
|
|
Sales
|
$120,000
|
$130,000
|
$150,000
|
|
Cost of goods sold
|
72,000
|
78,000
|
90,000
|
|
Gross margin
|
48,000
|
52,000
|
60,000
|
|
Selling and administrative expenses
|
24,900
|
26,400
|
29,400
|
|
Net operating income
|
$23,100
|
$25,600
|
$30,600
|
Budgeting Assumptions -
1. 60% of sales are cash sales and 40% of sales are credit sales. Twenty percent of all credit sales are collected in the month of sale and the remaining 80% are collected in the month subsequent to the sale.
2. Budgeted sales for July are $160,000.
3. 10% of merchandise inventory purchases are paid in cash at the time of the purchase. The remaining 90% of purchases are credit purchases. All purchases on credit are paid in the month subsequent to the purchase. The accounts payable at March 31 will be paid in April.
4. Each month's ending merchandise inventory should equal $10,000 plus 50% of the next month's cost of goods sold.
5. Depreciation expense is $1,900 per month. All other selling and administrative expenses are paid in full in the month the expense is incurred.
Required - Calculate the budgeted merchandise purchases for April, May, and June.