Minden Company is a wholesale distributor of premium European chocolates. The company’s balance sheet as of April 30 is given below: Minden Company Balance Sheet April 30 Assets Cash $ 17,200 Accounts receivable 58,000 Inventory 48,250 Buildings and equipment, net of depreciation 204,000 Total assets $ 327,450 Liabilities and Stockholders’ Equity Accounts payable $ 67,000 Note payable 16,200 Common stock 180,000 Retained earnings 64,250 Total liabilities and stockholders’ equity $ 327,450 The company is in the process of preparing a budget for May and has assembled the following data: Sales are budgeted at $253,000 for May. Of these sales, $75,900 will be for cash; the remainder will be credit sales. One-half of a month’s credit sales are collected in the month the sales are made, and the remainder is collected in the following month. All of the April 30 accounts receivable will be collected in May. Purchases of inventory are expected to total $140,000 during May. These purchases will all be on account. Forty percent of all purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the April 30 accounts payable to suppliers will be paid during May. The May 31 inventory balance is budgeted at $47,000. Selling and administrative expenses for May are budgeted at $93,000, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,850 for the month. The note payable on the April 30 balance sheet will be paid during May, with $300 in interest. (All of the interest relates to May.) New refrigerating equipment costing $11,100 will be purchased for cash during May. During May, the company will borrow $25,400 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year. Required: 1. Calculate the expected cash collections from customers for May. 2. Calculate the expected cash disbursements for merchandise purchases for May. 3. Prepare a cash budget for May. 4. Prepare a budgeted income statement for May. 5. Prepare a budgeted balance sheet as of May 31.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Problem 8-19 Cash Budget ; Income Statement; Balance Sheet [LO8-2, LO8-4, LO8-8, LO8-9, LO8-10]
Minden Company is a wholesale distributor of premium European chocolates. The company’s balance sheet as of April 30 is given below:
| Minden Company Balance Sheet April 30 |
||
| Assets | ||
| Cash | $ | 17,200 |
| 58,000 | ||
| Inventory | 48,250 | |
| Buildings and equipment, net of |
204,000 | |
| Total assets | $ | 327,450 |
| Liabilities and |
||
| Accounts payable | $ | 67,000 |
| Note payable | 16,200 | |
| Common stock | 180,000 | |
| 64,250 | ||
| Total liabilities and stockholders’ equity | $ | 327,450 |
The company is in the process of preparing a budget for May and has assembled the following data:
-
Sales are budgeted at $253,000 for May. Of these sales, $75,900 will be for cash; the remainder will be credit sales. One-half of a month’s credit sales are collected in the month the sales are made, and the remainder is collected in the following month. All of the April 30 accounts receivable will be collected in May.
-
Purchases of inventory are expected to total $140,000 during May. These purchases will all be on account. Forty percent of all purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the April 30 accounts payable to suppliers will be paid during May.
-
The May 31 inventory balance is budgeted at $47,000.
-
Selling and administrative expenses for May are budgeted at $93,000, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,850 for the month.
-
The note payable on the April 30 balance sheet will be paid during May, with $300 in interest. (All of the interest relates to May.)
-
New refrigerating equipment costing $11,100 will be purchased for cash during May.
-
During May, the company will borrow $25,400 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.
Required:
1. Calculate the expected cash collections from customers for May.
2. Calculate the expected cash disbursements for merchandise purchases for May.
3. Prepare a cash budget for May.
4. Prepare a
5. Prepare a budgeted balance sheet as of May 31.
Trending now
This is a popular solution!
Step by step
Solved in 6 steps
