Check my Wheeling Company is a merchandiser that provided a

Check my Wheeling Company is a merchandiser that provided a balance sheet as of September 30 as shown below: Balance Sheet r 30 $ 78.600 102,000 40,500 279,000 $ 500,100 Cash rencesTotal assets payable stock earnings $ 129,600 216,000 154,500 Total liabilities and stockholders\' equity the following data The company is in the process of preparing a budget for October and has as 1. Sales are budgeted at $300,000 for October and $310,000 for November. Of these sales, 35% will be for cash, the remainder will 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 $86,800, exclusive of depreciation. These expenses will be paid 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 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 30 accounts payable to suppliers will be paid during October Next

Solution

1 a. Budgeted cash collections: $ Accounts receivable balance 102000 Cash sales- (300000*35%) 105000 Credit sales-(300000-105000=195000) 40% collected in october (195000*40%) 78000 Total budgeted cash collections 285000 b. Budgted merchandise purchase Cost of goods sold (300000*0.45) 135000 Add: ending inventory 30%*(310000*0.45) 41850 Total needed 176850 Less: Beginning inventory 40500 Merchandise to be purchased 136350 c. Budgeted cash disbursement for merchandise purchase $ Accounts payable 129600 30% in the month of purchase (136350*30%) 40905 Total 170505 d. Net operating income: $ $ Sales 300000 Less: Cost of goods sold 135000 Gross profit 165000 Less: Selling and administrative expense 86800 Depreciation 2790 89590 Net operating income 75410 e. Budgeted balance sheet $ Assets Cash (Note:1) 106295 Accounts receivable (60% of credit sales-195000*60%) 117000 Inventory 30%*(310000*0.45) 41850 Buildings and equipment (279000-2790) 276210 Total assets 541355 Liabilities and stockholder\'s equity Accounts payable (70% of merchandise purchase-136350*70%) 95445 Common stock 216000 Retained earnings (154500+75410) 229910 Total liabilities and stockholder\'s equity 541355 Note:1- Cash budget $ $ Beginning balnce 78600 Add: Cash collections (1-a) 285000 Total cash available 363600 Less: Cash disbursement for merchandise (1-c) 170505 Selling and administrative expense 86800 257305 Ending balance 106295 2 a. Budgeted cash collections: $ Accounts receivable balance 102000 Cash sales- (300000*35%) 105000 Credit sales-(300000-105000=195000) 50% collected in october (195000*50%) 97500 Total budgeted cash collections 304500 b. Budgted merchandise purchase Cost of goods sold (300000*0.45) 135000 Add: ending inventory 10%*(310000*0.45) 13950 Total needed 148950 Less: Beginning inventory 40500 Merchandise to be purchased 108450 c. Budgeted cash disbursement for merchandise purchase $ Accounts payable 129600 20% in the month of purchase (108450*20%) 21690 Total 151290 d. Net operating income: $ $ Sales 300000 Less: Cost of goods sold 135000 Gross profit 165000 Less: Selling and administrative expense 86800 Depreciation 2790 89590 Net operating income 75410 e. Budgeted balance sheet $ Assets Cash (Note:1) 145010 Accounts receivable (50% of credit sales-195000*50%) 97500 Inventory 10%*(310000*0.45) 13950 Buildings and equipment (279000-2790) 276210 Total assets 532670 Liabilities and stockholder\'s equity Accounts payable (80% of merchandise purchase-108450*80%) 86760 Common stock 216000 Retained earnings (154500+75410) 229910 Total liabilities and stockholder\'s equity 532670 Note:1- Cash budget $ $ Beginning balnce 78600 Add: Cash collections (2-a) 304500 Total cash available 383100 Less: Cash disbursement for merchandise (2-c) 151290 Selling and administrative expense 86800 238090 Ending balance 145010