Wheeling Company is a merchandiser that provided a balance sheet as of September 30 as shown below:
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Question:
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 | $ 77,800 |
Accounts receivable | 134,000 |
Inventory | 62,100 |
Buildings and equipment, net of depreciation | 284,000 |
Total assets | $ 557,900 |
Liabilities and Stockholders Equity | |
Accounts payable | $ 225,900 |
Common stock | 216,000 |
Retained earnings | 116,000 |
Total liabilities and stockholders equity | $ 557,900 |
The company is in the process of preparing a budget for October and assembled the following data:
- Sales are budgeted at $460,000 for October and $470,000 for November. Of these sales, 35% will be for cash; the remainder will be credit sales. Forty percent of a months credit sales are collected in the month the sales are made, and the remaining 60% are collected in the following month. All of the September 30 accounts receivable will be collected in October.
- The budgeted cost of goods sold is always 45% of sales and the ending merchandise inventory is always 30% of the following months cost of goods sold.
- 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.
- Selling and administrative expenses for October are budgeted at $81,400, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,840 for the month.
Required:
- Using the information provided, calculate or prepare the following for October:
- The budgeted cash collections.
- The budgeted merchandise purchases.
- The budgeted cash disbursements for merchandise purchases.
- The budgeted net operating income.
- An-end-of-month budgeted balance sheet.
- Assume the following changes to the underlying budgeting assumptions:
(1) 50% of a months credit sales are collected in the month the sales are made and the remaining 50% are collected in the following month, (2) the ending merchandise inventory is always 10% of the following months 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 for October:
- The budgeted cash collections.
- The budgeted merchandise purchases.
- The budgeted cash disbursements for merchandise purchases.
- Net operating income.
- An end-of-month budgeted balance sheet.
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