Wheeling Company is a merchandiser that provided a balance s

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 Accounts receivable Inventory Buildings and equipment, net of depreciation Total assets $ 62,600 106,000 43.200 235,000 $ 446,800 Liabilities and Stockholders\' Equity Accounts payable Common stock Retained earnings Total liabilities and stockholders\' equity $ 121,800 216,000 109,000 446,800 The company is in the process of preparing a budget for October and has assembled the following data: I. Sales are budgeted at $320,000 for October and $330,000 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 2 The budgeted cost of goods sold is always 45% of sales and the ending merchandise inventory is always 30% of the following 3. All merchandise purchases are on account. Thirty percent of all purchases are paid for in the month of purchase and 70% are paid 4. Selling and administrative expenses for October are budgeted at $94,200, exclusive of depreciation. These expenses will be paid collected in the following month. All of the September 30 accounts receivable will be collected in October month\'s cost of goods sold. for in the following month. All of the September 30 accounts payable to suppliers will be paid during October. in cash. Depreciation is budgeted at $2,350 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 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

Solution

Answer 1-a Sales Budget Oct Nov Sales              320,000              330,000 Cash Sales - 35%              112,000              115,500 Credit Sales - 65%              208,000              214,500 Budgeted Cash Collections Oct Cash Sales              112,000 Collection from Accounts Receivables Accounts Receivables - Sep              106,000 Oct Sales - $208,000 X 40%                83,200 Total cash Collections              301,200 Answer 1-b. Merchandise Purchase Budget Oct Nov Cost of Goods Sold - 45% of Sales              144,000              148,500 Add: Ending Inventory - $148,500 X 30%                44,550 Total Needs              188,550 Less: opening Inventory              (43,200) Required Purchases              145,350 Answer 1-c. Schedule of Cash payments to Suppliers Oct Cash Payment Accounts Payable - Sep              121,800 Oct Purchases - $145,350 X 30%                43,605 Total Cash Payment to Suppliers              165,405 Cash budget Oct Opening cash Balance                62,600 Add: receipts Collection from Customers              301,200 Total Cash available              363,800 Less: Disbursements Cash Disbursement - Accounts Payable              165,405 Selling & Admn. Exp. - $94,200                94,200 Total Disbursement              259,605 Cash Balance Closing              104,195 Answer 1-d. Income Statement For the Month Ending Oct 31 Sales              320,000 Less: Cost of Goods Sold - 45% of sales              144,000 Gross Margin              176,000 Less: Selling & Admn. Exp.                96,550 Net Income                79,450 Answer 1-e. Balance Sheet As on Oct 31 Assets Current Assets Cash              104,195 Accounts receivables              124,800 Inventory                44,550              273,545 Fixed Assets Building & Equipment - $235,000 - $2,350              232,650 Total Assets              506,195 Liabilities Accounts Payable              101,745 Total liabilities              101,745 Shareholders\'s Equity Common Stock              216,000 Retained Earnings              188,450 Total Stockholders equity              404,450 Total liabilities & Stockholders\' Equity              506,195 Schedule of Retained Earnings As on Oct 31 Opening Balance              109,000 Add: net income                79,450 Closing Balance              188,450 Answer 2-a Sales Budget Oct Nov Sales              320,000              330,000 Cash Sales - 35%              112,000              115,500 Credit Sales - 65%              208,000              214,500 Budgeted Cash Collections Oct Cash Sales              112,000 Collection from Accounts Receivables Accounts Receivables - Sep              106,000 Oct Sales - $208,000 X 50%              104,000 Total cash Collections              322,000 Answer 2-b. Merchandise Purchase Budget Oct Nov Cost of Goods Sold - 45% of Sales              144,000              148,500 Add: Ending Inventory - $148,500 X 10%                14,850 Total Needs              158,850 Less: opening Inventory              (43,200) Required Purchases              115,650 Answer 2-c. Schedule of Cash payments to Suppliers Oct Cash Payment Accounts Payable - Sep              121,800 Oct Purchases - $145,350 X 20%                23,130 Total Cash Payment to Suppliers              144,930 Cash budget Oct Opening cash Balance                62,600 Add: receipts Collection from Customers              322,000 Total Cash available              384,600 Less: Disbursements Cash Disbursement - Accounts Payable              144,930 Selling & Admn. Exp. - $94,200                94,200 Total Disbursement              239,130 Cash Balance Closing              145,470 Answer 2-d. Income Statement For the Month Ending Oct 31 Sales              320,000 Less: Cost of Goods Sold - 45% of sales              144,000 Gross Margin              176,000 Less: Selling & Admn. Exp.                96,550 Net Income                79,450 Answer 2-e. Balance Sheet As on Oct 31 Assets Current Assets Cash              145,470 Accounts receivables              104,000 Inventory                14,850              264,320 Fixed Assets Building & Equipment - $235,000 - $2,350              232,650 Total Assets              496,970 Liabilities Accounts Payable                92,520 Total liabilities                92,520 Shareholders\'s Equity Common Stock              216,000 Retained Earnings              188,450 Total Stockholders equity              404,450 Total liabilities & Stockholders\' Equity              496,970 Schedule of Retained Earnings As on Oct 31 Opening Balance              109,000 Add: net income                79,450 Closing Balance              188,450