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 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     Millen’s managers have made the following additional assumptions and estimates:   Estimated sales for July and August are $310,000 and $330,000, respectively. 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. 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. 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. 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.   Required: 6. Calculate the estimated accounts receivable turnover and inventory turnover for the month of July. 8. Using the indirect method, calculate the estimated net cash provided by operating activities for July.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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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
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
 

 

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.

 

Required:

6. Calculate the estimated accounts receivable turnover and inventory turnover for the month of July.

8. Using the indirect method, calculate the estimated net cash provided by operating activities for July.

 

 

 
Net income
$
54,000
Adjustments to convert net income to a cash basis:
Depreciation
$
10,000
Increase in accounts receivable
(7,600)
Increase in inventory
(2,400)
Increase in accounts payable
20,040
20,040
Net cash provided by operating activities
$
74,040
Transcribed Image Text:Net income $ 54,000 Adjustments to convert net income to a cash basis: Depreciation $ 10,000 Increase in accounts receivable (7,600) Increase in inventory (2,400) Increase in accounts payable 20,040 20,040 Net cash provided by operating activities $ 74,040
Calculate the estimated accounts receivable tur
decimal places.)
Accounts receivable turnover
|Inventory turnover
4.84
Transcribed Image Text:Calculate the estimated accounts receivable tur decimal places.) Accounts receivable turnover |Inventory turnover 4.84
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