eacon 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 $ 68,200 Accounts receivable   42,000 Inventory   63,400 Buildings and equipment, net of depreciation   122,000 Total assets $ 295,600 Liabilities and Stockholders’ Equity Accounts payable $ 96,400 Common stock   70,000 Retained earnings   129,200 Total liabilities and stockholders’ equity $ 295,600     Budgeted Income Statements             April   May   June Sales $ 178,000   $ 188,000   $ 208,000 Cost of goods sold   106,800     112,800     124,800   Gross margin   71,200     75,200     83,200 Selling and administrative expenses   19,000     20,500     23,500 Net operating income $ 52,200   $ 54,700   $ 59,700     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 $218,000. 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 $1,800 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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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 $ 68,200
Accounts receivable   42,000
Inventory   63,400
Buildings and equipment, net of depreciation   122,000
Total assets $ 295,600
Liabilities and Stockholders’ Equity
Accounts payable $ 96,400
Common stock   70,000
Retained earnings   129,200
Total liabilities and stockholders’ equity $ 295,600
 

 

Budgeted Income Statements          
  April   May   June
Sales $ 178,000   $ 188,000   $ 208,000
Cost of goods sold   106,800     112,800     124,800  
Gross margin   71,200     75,200     83,200
Selling and administrative expenses   19,000     20,500     23,500
Net operating income $ 52,200   $ 54,700   $ 59,700
 

 

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 $218,000.

  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 $1,800 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.)

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