Millen Corporation is a merchandiser that is preparing a master budget for the month of July. The company's balance sheet as of June 30th is shown below: Millen Corporation Balance Sheet June 30 Assets Cash $120,000 166,000 37,200 554,800 Accounts receivable Inventory Plant and equipment, net of depreciation Total assets $878,000 Liabilities and Stockholders' Equity Accounts payable $ 93,000 Common stock 586,000 Retained earnings 199,000 Total liabilities and stockholders' equity $878,000 Millen's managers have made the following additional assumptions and estimates: 1. Estimated sales for July and August are $310,000 and $330,000, respectively. 2. Each month's sales are 20% cash sales and 80% credit sales. Each month's credit sales are collected 30% in the month of sale and 70% in the month following the sale. All of the accounts receivable at June 30 will be collected in July. 3. Each month's ending inventory must equal 20% of the cost of next month's sales. The cost of goods sold is 60% of sales. The company pays for 40% of its merchandise purchases in the month of the purchase and the remaining 60% in the month following the purchase. All of the accounts payable at June 30 will be paid in July. 4. Monthly selling and administrative expenses are always $70,000. Each month $10,000 of this total amount is depreciation expense and the remaining $60,000 relates to expenses that are paid in the month they are incurred. 5. The company does not plan to buy or sell any plant and equipment during July. It will not borrow any money, pay a dividend, issue any common stock, or repurchase any of its own common stock during July.
Millen Corporation is a merchandiser that is preparing a master budget for the month of July. The company's balance sheet as of June 30th is shown below: Millen Corporation Balance Sheet June 30 Assets Cash $120,000 166,000 37,200 554,800 Accounts receivable Inventory Plant and equipment, net of depreciation Total assets $878,000 Liabilities and Stockholders' Equity Accounts payable $ 93,000 Common stock 586,000 Retained earnings 199,000 Total liabilities and stockholders' equity $878,000 Millen's managers have made the following additional assumptions and estimates: 1. Estimated sales for July and August are $310,000 and $330,000, respectively. 2. Each month's sales are 20% cash sales and 80% credit sales. Each month's credit sales are collected 30% in the month of sale and 70% in the month following the sale. All of the accounts receivable at June 30 will be collected in July. 3. Each month's ending inventory must equal 20% of the cost of next month's sales. The cost of goods sold is 60% of sales. The company pays for 40% of its merchandise purchases in the month of the purchase and the remaining 60% in the month following the purchase. All of the accounts payable at June 30 will be paid in July. 4. Monthly selling and administrative expenses are always $70,000. Each month $10,000 of this total amount is depreciation expense and the remaining $60,000 relates to expenses that are paid in the month they are incurred. 5. The company does not plan to buy or sell any plant and equipment during July. It will not borrow any money, pay a dividend, issue any common stock, or repurchase any of its own common stock during July.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
Transcribed Image Text:**Required:**
1. Calculate the expected cash collections for July.
2. Calculate the expected cash disbursements for merchandise purchases for July.
3. Prepare a cash budget for July.
4. Prepare a budgeted income statement for the month ended July 31st. Use an absorption format.
5. Prepare a budgeted balance sheet as of July 31st.
6. Calculate the estimated accounts receivable turnover and inventory turnover for the month of July.
7. Calculate the estimated operating cycle for the month of July. (Hint: Use 30 days in the numerator to calculate the average collection period and the average sales period.)
8. Using the indirect method, calculate the estimated net cash provided by operating activities for July.
Transcribed Image Text:**Millen Corporation Financial Overview**
Millen Corporation is a merchandiser preparing a master budget for July. Presented below is the balance sheet as of June 30th:
**Millen Corporation Balance Sheet - June 30**
**Assets**
- Cash: $120,000
- Accounts receivable: $166,000
- Inventory: $37,200
- Plant and equipment, net of depreciation: $554,800
- **Total assets: $878,000**
**Liabilities and Stockholders’ Equity**
- Accounts payable: $93,000
- Common stock: $586,000
- Retained earnings: $199,000
- **Total liabilities and stockholders’ equity: $878,000**
**Additional Assumptions and Estimates:**
1. Estimated sales for July and August are $310,000 and $330,000, respectively.
2. Sales are 20% cash and 80% credit. Credit sales are collected 30% in the month of sale and 70% in the following month. All accounts receivable at June 30 will be collected in July.
3. Ending inventory must equal 20% of the cost of next month’s sales. The cost of goods sold is 60% of sales. The company pays 40% of merchandise purchases in the month of purchase and 60% in the following month. All accounts payable at June 30 will be paid in July.
4. Monthly selling and administrative expenses are $70,000, with $10,000 for depreciation and the rest for current expenses.
5. No plans to buy or sell plant and equipment, borrow money, pay dividends, issue or repurchase common stock in July.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 2 images
Knowledge Booster
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.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education