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Exercise 8-18 Cash Flows; Budgeted Income Statement and BalanceSheet [LO8-2, LO8-3, LO8-9, LO8-10]

Wolfpack Company is a merchandising company that is preparing abudget for the month of July. It has provided the followinginformation:

Wolfpack Company Balance Sheet June 30
Assets
Cash	$	75,000
Accounts receivable		50,000
Inventory		30,000
Buildings and equipment, net of depreciation		150,000
Total assets	$	305,000
Liabilities and Stockholders’ Equity
Accounts payable	$	35,300
Common stock		100,000
Retained earnings		169,700
Total liabilities and stockholders’ equity	$	305,000

Budgeting Assumptions:

1. All sales are on account. Thirty percent of the credit salesare collected in the month of sale and the remaining 70% arecollected in the month subsequent to the sale. The accountsreceivable at June 30 will be collected in July.
2. All merchandise purchases are on account. Twenty percent ofmerchandise inventory purchases are paid in the month of thepurchase and the remaining 80% is paid in the month after thepurchase. The accounts payable at June 30 will be paid inJuly.
3. The budgeted inventory balance at July 31 is $22,000.
4. Depreciation expense is $3,000 per month. All other selling andadministrative expenses are paid in full in the month the expenseis incurred.
5. The company’s cash budget for July shows expected cashcollections of $77,000, expected cash disbursements for merchandisepurchases of $44,500, and cash paid for selling and administrativeexpenses of $15,000.

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.