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2. (12 points) Weldon Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow: The company sells each unit for $45 Budgeted Sales: Month October November December January 40,000 25,000 Sales in Units Collections are expected to be 70 % in the month of sale, 30 % in the month following the sale. The A/R balance at September 30th will be collected in full in October. The cost of the merchandise is $38 per unit. In addition to meeting the current month's sales demand, management wants to maintain and ending inventory balance of 10 % of the next month's sales. The beginning inventory balance at October 1st is 3,000 units. Payment for merchandise is made as follows: paid in the month of the purchase, % paid the month following the purchase. The A/P balance at September 30th will be paid in full in October. A dividend was paid in October for $500,000. Minimum cash balance is $100,000. The company has a line of credit for $500,000 at an annual interest rate of 12%. Loans are taken out on first day of month borrowed and repaid at the end of the quarter with interest. 30,000 30,000 Balance Sheet September 30 Assets S 100,000 250,000 114,000 Cash Accounts receivable Inventory.. Property, plant and equipment (net of $200,000 accumulated depreciation) Total assets. 866,400 $1.330,400 Liabilities and Stockholders' Equity S 300,000 582,000 448,400 $1,330,400 Accounts payable Common stock. Retained earnings. Total liabilities and stockholders' equity Required: a. Prepare a Sales Budget for October, November, December, and Quarter. b. Prepare a Schedule of Expected Cash Collections for October, November, December, and Quarter. c. Prepare a Merchandise Purchases Budget for October, November, December, and Quarter. d. Prepare a Schedule of Expected Cash Disbursements for October, November, December, and Quarter. e. Prepare Cash Budgets for October, November, December, and Quarter. Sales Budget Quarter December October November Units Sold 95,O00 $45 301000 Sales Price per unit 45 401000 25,000 $ 45 445 Total Sales 4275,000 31,e00,0 $L12.5,000 35,00 Schedule of Expected Cash Collections December Quarter November October 2.501000 $ 250,000 Beginning A/R , 35yd0e x 3ew $105,600 $1/126r000 70 $797,500 35, xo $415000 $6350,000 October Sales 125,6ory sor 43375 00 $900,000xE S126a,00a November Sales $,125,00 December Sales $1,260,000 4185,000 Total 81,192,500 1,195,000 S1,597500 Purchases Budget December Quarter October November 15/000 30,00 6 Budgeted Sales (units) +Desired ending 5/000 Ho,oo0 a5, 00x10 4oygo 10 3oio 00 x 10 1500 H000 3000 2500 inv. =total needs 104,500 43,000 21,000 32150 1500- -Beginning inv. Hooo 43r000-4000 3,000 3000 32,500-3000210-250 21,S00 2500 =Total Purchases 45,000 26,Soo 38 X cost per unit 38 38 =Total purchase 1.121,00 10o7,00 0 $1,4921000 3,c10,000 cost Schedule of Expected Cash Disbursements November December Quarter October 300,000 Beginning A/P October Purchases November Purchases December Purchases Total Cash Budget Quarter December November October Beginning Cash bal. +Cash collections Cash Available Less: Cash Disburse. For Purchases Dividend =Total cash disburse. Excess/(Deficiency) Borrowing Repayment Interest Ending Cash bal

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