Problem - Weller Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow:
- Sales are budgeted at $390,000 for November, $410,000 for December, and $400,000 for January.
- Collections are expected to be 80% in the month of sale and 20% in the month following the sale.
- The cost of goods sold is 73% of sales.
- The company desires an ending merchandise inventory equal to 80% of the cost of goods sold in the following month.
- Payment for merchandise is made in the month following the purchase.
- Other monthly expenses to be paid in cash are $20,900.
- Monthly depreciation is $20,700.
- Ignore taxes.
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Balance Sheet October 31
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Assets
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Cash
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$21,700
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Accounts receivable
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82,700
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Merchandise inventory
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227,760
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Property, plant and equipment (net of $593,000 accumulated depreciation)
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1,003,000
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Total assets
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$1,335,160
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Liabilities and Stockholders' Equity
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Accounts payable
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$195,700
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Common stock
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580,000
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Retained earnings
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559,460
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Total liabilities and stockholders' equity
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$1,335,160
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Required:
a. Prepare a Schedule of Expected Cash Collections for November and December.
b. Prepare a Merchandise Purchases Budget for November and December.
c. Prepare Cash Budgets for November and December.
d. Prepare Budgeted Income Statements for November and December.
e. Prepare a Budgeted Balance Sheet for the end of December.