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Dresser Corporation sells bedroom furniture. Data regarding the store's operations follow:
Sales are budgeted at $330,000 for November, $300,000 for December, and $320,000 for January.
Collections are expected to be 85% in the month of sale and 15% in the month following the sale.
The cost of goods sold is 60% of sales.
The company desires an ending merchandise inventory equal to 80% of the cost of goods sold in the following month.
Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $21,200.
Monthly depreciation is $21,000.
Ignore taxes.
| Balance Sheet October 31 | |
| Assets | | |
| Cash | $ | 22,000 |
| Accounts receivable | | 83,000 |
| Merchandise inventory | | 158,400 |
| Property, plant and equipment (net of $594,000 accumulated depreciation) | | 1,004,000 |
| Total assets | $ | 1,267,400 |
| | | |
| Liabilities and Stockholders' Equity | | |
| Accounts payable | $ | 196,000 |
| Common stock | | 620,000 |
| Retained earnings | | 451,400 |
| Total liabilities and stockholders' equity | $ | 1,267,400 |
| | | | |
Required:
a. Prepare a Schedule of Expected Cash Collections for November and December.
b. Prepare a Merchandise Purchases Budget for November and December.
c. Prepare Cash Budgets for November and December.
d. Prepare Budgeted Income Statements for November and December.
e. Prepare a Budgeted Balance Sheet for the end of December.
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