Reference no: EM13490075
Welnor Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow:
- Sales are budgeted at $320,000 for April, $340,000 for May, $330,000 for June and $300,000 for July.
- Collections are expected to be 75% in the month of sale, 20% in the month following the sale, and 5% are uncollectible.
- The cost of goods sold is 65% 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 $21,000.
- Dividends of $25,000 are payable in April
- Equipment costing $60,000 will be purchased for cash in April
- Monthly depreciation for April is $16,000 and $18,000 for May and June.
- Company requires a minimum cash balance of $50,000 per month. If necessary an open line of credit is available at a rate of 12% per year. Short-term borrowing is done at the beginning of the required month and repayment with interest is made at the end of the month.
- Ignore taxes.
Statement of Financial Position
March 31,
Assets
Cash......................................................................................................... $22,000
Accounts Receivable (net of allowance for uncollectable accounts).................................82,000
Merchandise Inventory.......................................................................................166,400
Property, plant and equipment (net of $658,000 accumulated depreciation)...................... 1,170,000
Total Assets.................................................................................................. $1,440,400
Liabilities & Stockholders' Equity
Accounts Payable........................................................................................... $199,000
Common Stock.............................................................................................. 840,000
Retained Earnings............................................................................................ 401,400
Total Liabilities &Stockholders' Equity................................................................. $1,440,000
Required:
a. Prepare a Schedule of Expected Cash Collections for April, May and June.
b. Prepare a Merchandise Purchases Budget for April, May and June.
c. Prepare a Cash Budgets for April, May and June.
d. Prepare a Budgeted Income Statement for the Quarter.
e. Prepare a Budgeted Balance Sheet for the end of June.