Reference no: EM133106761

Question - 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 $73,600

Accounts receivable 39,600

Inventory 66,700

Buildings and equipment, net of depreciation 192,000

Total assets $371,900

Liabilities and Stockholders' Equity

Accounts payable $167,300

Common stock 70,000

Retained earnings 134,600

Total liabilities and stockholders' equity $371,900

Budgeted Income Statements	April	May	June
Sales	$189,000	$199,000	$219,000
Cost of goods sold	113,400	119,400	131,400
Gross margin	75,600	79,600	87,600
Selling and administrative expenses	19,900	21,400	24,400
Net operating income	$55,700	$58,200	$63,200

Budgeting Assumptions:

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.

Budgeted sales for July are $229,000.

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.

Each month's ending merchandise inventory should equal $10,000 plus 50% of the next month's cost of goods sold.

Depreciation expense is $1,650 per month. All other selling and administrative expenses are paid in full in the month the expense is incurred.

Required -

1. Calculate the expected cash collections for April, May, and June.

2. Calculate the budgeted merchandise purchases for April, May, and June.

3. Calculate the expected cash disbursements for merchandise purchases for April, May, and June.

4. Prepare a budgeted balance sheet at June 30th. (Hint: You need to calculate the cash paid for selling and administrative expenses during April, May, and June to determine the cash balance in your June 30th balance sheet.)