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 $ 73,000 Accounts receivable 44,400 Inventory 61,600 Buildings and equipment, net of depreciation 183,000 Total assets $ 362,000 Liabilities and Stockholders’ Equity Accounts payable $ 153,500 Common stock 70,000 Retained earnings 138,500 Total liabilities and stockholders’ equity $ 362,000 Budgeted Income Statements April May June Sales $ 172,000 $ 182,000 $ 202,000 Cost of goods sold 103,200 109,200 121,200 Gross margin 68,800 72,800 80,800 Selling and administrative expenses 21,600 23,100 26,100 Net operating income $ 47,200 $ 49,700 $ 54,700 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 $212,000. 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 $1,950 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.)

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 $ 73,000 Accounts receivable 44,400 Inventory 61,600 Buildings and equipment, net of depreciation 183,000 Total assets $ 362,000 Liabilities and Stockholders’ Equity Accounts payable $ 153,500 Common stock 70,000 Retained earnings 138,500 Total liabilities and stockholders’ equity $ 362,000 Budgeted Income Statements April May June Sales $ 172,000 $ 182,000 $ 202,000 Cost of goods sold 103,200 109,200 121,200 Gross margin 68,800 72,800 80,800 Selling and administrative expenses 21,600 23,100 26,100 Net operating income $ 47,200 $ 49,700 $ 54,700 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 $212,000. 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 $1,950 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.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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	$	73,000
Accounts receivable		44,400
Inventory		61,600
Buildings and equipment, net of depreciation		183,000
Total assets	$	362,000
Liabilities and Stockholders’ Equity
Accounts payable	$	153,500
Common stock		70,000
Retained earnings		138,500
Total liabilities and stockholders’ equity	$	362,000

Budgeted Income Statements
	April		May		June
Sales	$	172,000		$	182,000	$	202,000
Cost of goods sold		103,200			109,200		121,200
Gross margin		68,800			72,800		80,800
Selling and administrative expenses		21,600			23,100		26,100
Net operating income	$	47,200		$	49,700	$	54,700

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 $212,000.
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 $1,950 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.)

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