Wheeling Company is a merchandiser that provided a balance sheet as of September 30 as shown below: Wheeling Company Balance Sheet September 30 Assets $ 72,200 162,000 81,000 Cash Accounts receivable Inventory Buildings and equipment, net of depreciation 255,000 $ 570,200 Total assets Liabilities and Stockholders' Equity Accounts payable Common stock $ 238,700 216,000 Retained earnings 115,500 Total liabilities and stockholders' equity $ 570,200 The company is in the process of preparing a budget for October and has assembled the following data: 1. Sales are budgeted at $600,000 for October and $610,000 for November. Of these sales, 35% will be for cash; the remainder will be credit sales. Forty percent of a month's credit sales are collected in the month the sales are made, and the remaining 60% is collected in the following month. All of the September 30 accounts receivable will be collected in October. 2. The budgeted cost of goods sold is always 45% of sales and the ending merchandise inventory is always 30% of the following month's cost of goods sold. 3. All merchandise purchases are on account. Thirty percent of all purchases are paid for in the month of purchase and 70% are paid for in the following month. All of the September 30 accounts payable to suppliers will be paid during October. 4. Selling and administrative expenses for October are budgeted at $81,200, exclusive of depreciation. These expenses will be paid cash. Depreciation is budgeted at $2,550 for the month.
Wheeling Company is a merchandiser that provided a balance sheet as of September 30 as shown below: Wheeling Company Balance Sheet September 30 Assets $ 72,200 162,000 81,000 Cash Accounts receivable Inventory Buildings and equipment, net of depreciation 255,000 $ 570,200 Total assets Liabilities and Stockholders' Equity Accounts payable Common stock $ 238,700 216,000 Retained earnings 115,500 Total liabilities and stockholders' equity $ 570,200 The company is in the process of preparing a budget for October and has assembled the following data: 1. Sales are budgeted at $600,000 for October and $610,000 for November. Of these sales, 35% will be for cash; the remainder will be credit sales. Forty percent of a month's credit sales are collected in the month the sales are made, and the remaining 60% is collected in the following month. All of the September 30 accounts receivable will be collected in October. 2. The budgeted cost of goods sold is always 45% of sales and the ending merchandise inventory is always 30% of the following month's cost of goods sold. 3. All merchandise purchases are on account. Thirty percent of all purchases are paid for in the month of purchase and 70% are paid for in the following month. All of the September 30 accounts payable to suppliers will be paid during October. 4. Selling and administrative expenses for October are budgeted at $81,200, exclusive of depreciation. These expenses will be paid cash. Depreciation is budgeted at $2,550 for the month.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Please answer 1e, 2a, 2b, 2c, 2d, and 2e only.
Transcribed Image Text:Wheeling Company is a merchandiser that provided a balance sheet as of September 30 as shown below:
Wheeling Company
Balance Sheet
September 30
Assets
Cash
$ 72,200
162,000
Accounts receivable
81,000
255,000
Inventory
Buildings and equipment, net of depreciation
Total assets
$ 570,200
Liabilities and Stockholders' Equity
Accounts payable
$ 238,700
Common stock
216,000
Retained earnings
115,500
Total liabilities and stockholders' equity
$ 570,200
The company is in the process of preparing a budget for October and has assembled the following data:
1. Sales are budgeted at $600,000 for October and $610,000 for November. Of these sales, 35% will be for cash; the remainder will
be credit sales. Forty percent of a month's credit sales are collected in the month the sales are made, and the remaining 60% is
collected in the following month. All of the September 30 accounts receivable will be collected in October.
2. The budgeted cost of goods sold is always 45% of sales and the ending merchandise inventory is always 30% of the following
month's cost of goods sold.
3. All merchandise purchases are on account. Thirty percent of all purchases are paid for in the month of purchase and 70% are paid
for in the following month. All of the September 30 accounts payable to suppliers will be paid during October.
4. Selling and administrative expenses for October are budgeted at $81,200, exclusive of depreciation. These expenses will be paid in
cash. Depreciation is budgeted at $2,550 for the month.
Required:
1. Using the information provided, calculate or prepare the following:
a. The budgeted cash collections for October.
b. The budgeted merchandise purchases for October.
c. The budgeted cash disbursements for merchandise purchases for October.
d. The budgeted net operating income for October.
e. A budgeted balance sheet at October 31.
Transcribed Image Text:2. Assume the following changes to the underlying budgeting assumptions:
(1) 50% of a month's credit sales are collected in the month the sales are made and the remaining 50% is collected in the following
month, (2) the ending merchandise inventory is always 10% of the following month's cost of goods sold, and (3) 20% of all purchases
are paid for in the month of purchase and 80% are paid for in the following month. Using these new assumptions, calculate or prepare
the following:
a. The budgeted cash collections for October.
b. The budgeted merchandise purchases for October.
c. The budgeted cash disbursements for merchandise purchases for October.
d. Net operating income for the month of October.
e. A budgeted balance sheet at October 31.
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