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 $ 59,200 Accounts receivable 31,600 Inventory 47,500 Buildings and equipment, net of depreciation 119,000 Total assets $ 257,300 Liabilities and Stockholders’ Equity Accounts payable $ 76,400 Common stock 70,000 Retained earnings 110,900 Total liabilities and stockholders’ equity $ 257,300 Budgeted Income Statements April May June Sales $ 125,000 $ 135,000 $ 155,000 Cost of goods sold 75,000 81,000 93,000 Gross margin 50,000 54,000 62,000 Selling and administrative expenses 17,500 19,000 22,000 Net operating income $ 32,500 $ 35,000 $ 40,000 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 $165,000. 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 $1,150 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 $ 59,200 Accounts receivable 31,600 Inventory 47,500 Buildings and equipment, net of depreciation 119,000 Total assets $ 257,300 Liabilities and Stockholders’ Equity Accounts payable $ 76,400 Common stock 70,000 Retained earnings 110,900 Total liabilities and stockholders’ equity $ 257,300 Budgeted Income Statements April May June Sales $ 125,000 $ 135,000 $ 155,000 Cost of goods sold 75,000 81,000 93,000 Gross margin 50,000 54,000 62,000 Selling and administrative expenses 17,500 19,000 22,000 Net operating income $ 32,500 $ 35,000 $ 40,000 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 $165,000. 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 $1,150 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	$ 59,200
Accounts receivable	31,600
Inventory	47,500
Buildings and equipment, net of depreciation	119,000
Total assets	$ 257,300
Liabilities and Stockholders’ Equity
Accounts payable	$ 76,400
Common stock	70,000
Retained earnings	110,900
Total liabilities and stockholders’ equity	$ 257,300

Budgeted Income Statements	April	May	June
Sales	$ 125,000	$ 135,000	$ 155,000
Cost of goods sold	75,000	81,000	93,000
Gross margin	50,000	54,000	62,000
Selling and administrative expenses	17,500	19,000	22,000
Net operating income	$ 32,500	$ 35,000	$ 40,000

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 $165,000.
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 $1,150 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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