Deacon Company is a merchandising company that is preparing a budget for the three-month period ended June 30. The following information is available   Deacon Company Balance Sheet March 31 Assets Cash $ 55,400 Accounts receivable   41,200 Inventory   53,200 Buildings and equipment, net of depreciation   180,000 Total assets $ 329,800 Liabilities and Stockholders’ Equity Accounts payable $ 143,500 Common stock   70,000 Retained earnings   116,300 Total liabilities and stockholders’ equity $ 329,800

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Problem 8-27 Cash Collections; Cash Disbursements; Budgeted Balance Sheet [LO8-2, LO8-3, LO8-4, LO8-10]

Deacon Company is a merchandising company that is preparing a budget for the three-month period ended June 30. The following information is available

 

Deacon Company
Balance Sheet
March 31
Assets
Cash $ 55,400
Accounts receivable   41,200
Inventory   53,200
Buildings and equipment, net of depreciation   180,000
Total assets $ 329,800
Liabilities and Stockholders’ Equity
Accounts payable $ 143,500
Common stock   70,000
Retained earnings   116,300
Total liabilities and stockholders’ equity $ 329,800
 

 

Budgeted Income Statements          
  April   May   June
Sales $ 144,000   $ 154,000   $ 174,000
Cost of goods sold   86,400     92,400     104,400  
Gross margin   57,600     61,600     69,600
Selling and administrative expenses   20,300     21,800     24,800
Net operating income $ 37,300   $ 39,800   $ 44,800
 

 

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 $184,000.

  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 $1,750 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 30. (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 30 balance sheet.)

 

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 5 steps

Blurred answer
Knowledge Booster
Accounting for Cash and cash equivalents
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education