80.2K

Verified Solution

Link Copied!

Wheeling CompanyBalance SheetSeptember $30$Assets$$Cash$ $59,000$Accounts receivable$90,000$Inventory$32,400$Buildings and equipment, net of depreciation$214,000$Total assets$ $395,400$Liabilities and Stockholders$$ Equity$$Accounts payable$ $73,000$Common stock$216,000$Retained earnings$106,400$Total liabilities and stockholders$$ equity$ $395,400$

The company is in the process of preparing a budget for October and assembled the following data:

Sales are budgeted at $$240,000$ for October and $$250,000$ for November. Of these sales, $35\%$ will be for cash; the remainder will be credit sales. Forty percent of a month$$s credit sales are collected in the month the sales are made, and the remaining $60\%$ are collected in the following month. All of the September $30$ accounts receivable will be collected in October.

The budgeted cost of goods sold is always $45\%$ of sales and the ending merchandise inventory is always $30\%$ of the following month$$s cost of goods sold.

All merchandise purchases are on account. Thirty percent of all purchases are paid for in the month of purchase and $70\%$ are paid for in the following month. All of the September $30$ accounts payable to suppliers will be paid during October.

Selling and administrative expenses for October are budgeted at $$78,000,$ exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $$2,000$ for the month.

Required:

Using the information provided, calculate or prepare the following for October:

The budgeted cash collections.The budgeted merchandise purchases.The budgeted cash disbursements for merchandise purchases.The budgeted net operating income.An end$-$of$-$month budgeted balance sheet.

Assume the following changes to the underlying budgeting assumptions:

$50\%$ of a month$$s credit sales are collected in the month the sales are made and the remaining $50\%$ are collected in the following monthThe ending merchandise inventory is always $10\%$ of the following month$$s cost of goods sold$20\%$ of all purchases are paid for in the month of purchase and $80\%$ are paid for in the following month.

Using these new assumptions, calculate or prepare the following for October:

The budgeted cash collections.The budgeted merchandise purchases.The budgeted cash disbursements for merchandise purchases.Net operating income.An end$-$of$-$month budgeted balance sheet.

Answer & Explanation Solved by verified expert

See Answer