Welnor Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow:
• Sales are budgeted at $320,000 for November, $340,000 for December, and $330,000 for January.
• Collections are expected to be 75% in the month of sale, 20% in the month following the sale, and 5% uncollectible.
• The cost of goods sold is 65% of sales.
• The company desires ending merchandise inventory to equal 80% of the following month's cost of goods sold. Payment for merchandise is made in the month following the purchase.
• Other monthly expenses to be paid in cash are $21,000.
• Monthly depreciation is $16,000.
• Ignore taxes.
Statement of Financial Position
October 31
Assets
Cash ............................................................................................ $ 22,000
Accounts receivable (net of allowance for uncollectible accounts) ..................... 82,000
Merchandise inventory ....................................................................... 166,400
Property, plant and equipment (net of $658,000 accumulated depreciation) ...... 1,170,000
Total assets ................................................................................ $ 1,440,400
Liabilities and Stockholders' Equity
Accounts payable ........................................................................... $ 199,000
Common stock ................................................................................. 840,000
Retained earnings .............................................................................. 401,400
Total liabilities and stockholders' equity ............................................... $ 1,440,400
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.