Ch 8 algo 1 Exercise 818 REV Cash Flows Budgeted Income Stat

Ch 8 algo 1 Exercise 8-18 (REV) Cash Flows; Budgeted Income Statement and Balance Sheet [LO8-2, LO8-3, LO8-9, LO8-10]

Wolfpack Company is a merchandising company that is preparing a budget for the month of July. It has provided the following information:

Budgeting Assumptions:

All sales are on account. Thirty percent of the credit sales are collected in the month of sale and the remaining 70% are collected in the month subsequent to the sale. The accounts receivable at June 30 will be collected in July.

All merchandise purchases are on account. Twenty percent of merchandise inventory purchases are paid in the month of the purchase and the remaining 80% is paid in the month after the purchase.

The budgeted inventory balance at July 31 is $36,600.

Depreciation expense is $3,160 per month. All other selling and administrative expenses are paid in full in the month the expense is incurred.

The company’s cash budget for July shows expected cash collections of $98,400, expected cash disbursements for merchandise purchases of $47,400, and cash paid for selling and administrative expenses of $16,040.

Required:

1. For the month of July, calculate the following:

a. Budgeted sales

b. Budgeted merchandise purchases

c. Budgeted cost of goods sold

d. Budgeted net operating income

2. Prepare a budgeted balance sheet as of July 31.

Wolfpack Company Balance Sheet June 30
Assets
Cash	$	83,600
Accounts receivable		69,600
Inventory		44,200
Buildings and equipment, net of depreciation		158,000
Total assets	$	355,400
Liabilities and Stockholders’ Equity
Accounts payable	$	37,400
Common stock		100,000
Retained earnings		218,000
Total liabilities and stockholders’ equity	$	355,400

Solution

Budgeted Sales

July 30.

(A)

Total Cash Collections

$    98,400.00

(B)

Less: Amount of june

$    69,600.00

(C )

Collection for July sales

$    28,800.00

(D)

%of sales collection in current month

30%

(C/D)

Total Sales of July

$    96,000.00

Budgeted Purchases

July 30.

(A)

Total Cash Disbursement for merchandise purchase

$ 47,400.00

(B)

Less: payment for June

$ 37,400.00

(C )

Payment for july purchase

$ 10,000.00

(D)

% of Payment for purchase made in same month

20%

(C/D)

Total Purchase for July

$ 50,000.00

Budgeted Cost of Goods Sold

Opening Inventory

$    44,200.00

Purchases during Month

$    50,000.00

Goods Available for sale

$    94,200.00

Less: Closing Inventory

$    36,600.00

CoGS

$    57,600.00

Budgeted net Operating income

sales revenue

$ 96,000.00

Less: CoGS

$ 57,600.00

Gross Profit

$ 38,400.00

Operating expenses

Depreciation

$    3,160.00

Selling and Administrative expenses

$ 16,040.00

Net Operating income

$ 19,200.00

Budgeted Balance Sheet

Assets

Cash*

$ 118,560.00

Accounts Receivables(70% of sales)

$    67,200.00

Inventory

$    36,600.00

Buildings and equipment, net of depreciation

$ 154,840.00

Total Assets

$ 377,200.00

Liabilities and Stockholders’ Equity

Accounts Payable(80% of Purchases)

$    40,000.00

Common Stock

$ 100,000.00

Retained Earnings

$ 237,200.00

Total liabilities and stockholders’ equity

$ 377,200.00

*Cash balance $83600+98400-47400-16040

Budgeted Sales
July 30.
(A)	Total Cash Collections	$    98,400.00
(B)	Less: Amount of june	$    69,600.00
(C )	Collection for July sales	$    28,800.00
(D)	%of sales collection in current month	30%
(C/D)	Total Sales of July	$    96,000.00