Question

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$ 9,200 accounts receivable76,250 inventory49,750 buildings and equipment, net of depreciation228,000 total assets$ 363,200 liabilities and stockholders’ equity accounts payable$ 63,750 note payable23,900 common stock180,000 retained earnings95,550 total liabilities and stockholders’ equity$ 363,200 the company is in the process of preparing a budget for may and has assembled the following data: sales are budgeted at $227,000 for may. of these sales, $68,100 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 $159,000 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 $87,500. selling and administrative expenses for may are budgeted at $79,500, exclusive of depreciation. these expenses will be paid in cash. depreciation is budgeted at $6,000 for the month. the note payable on the april 30 balance sheet will be paid during may, with $105 in interest. (all of the interest relates to may.) new refrigerating equipment costing $11,800 will be purchased for cash during may. during may, the company will borrow $25,100 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: calculate the expected cash collections from customers for may. calculate the expected cash disbursements for merchandise purchases for may. prepare a cash budget for may. prepare a budgeted income statement for may.

Answer 1

To calculate the expected cash collections from customers for May, consider the credit sales and collection period. Calculate the expected cash disbursements for merchandise purchases for May by considering the payment terms for purchases. prepare a cash budget for May by considering cash inflows and outflows. Prepare a budgeted income statement for May by subtracting expenses from the sales.

Step-by-step explanation:

To calculate the expected cash collections from customers for May, we need to consider the credit sales and the collection period. $68,100 of the sales will be cash, and the remaining credit sales of $158,900 will be collected over two months. So, $79,450 will be collected in May, and the remaining $79,450 will be collected in June. Therefore, the expected cash collections from customers for May will be $68,100 + $79,450 = $147,550.to calculate the expected cash disbursements for merchandise purchases for May, we need to consider the payment terms for purchases. 40% of the purchases made in May will be paid in May, which amounts to $63,600. The remaining 60% of the purchases made in May will be paid in June, which amounts to $95,400. Therefore, the expected cash disbursements for merchandise purchases for May will be $63,600 + $95,400 = $159,000.the cash budget for May is calculated by considering the cash inflows (such as cash collections from customers and interest received) and cash outflows (such as cash disbursements for merchandise purchases, selling and administrative expenses, depreciation, and interest paid). The net cash flow is then added to the beginning cash balance to calculate the ending cash balance.

The budgeted income statement for May can be prepared by subtracting the budgeted expenses (such as cost of goods sold, selling and administrative expenses, and depreciation) from the budgeted sales. The result will be the budgeted net income.