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Deacon Company is a merchandising company that is preparing a budget for the three-month period ended June 30. The following information is available: Deacon Company Balance Sheet March 31 Assets Cash…. Accounts receivable………….. Inventory Buildings and equipment, net of depreciation….. Total assets …… $ 55,000 36,000 40,000 100,000 $231,000 Liabilities and Stockholders' Equity Accounts payable ………… Common Stock …….. Retained earnings ….. Total liabilities and stockholders' equity……….. $ 51,300 70,000 109,700 $231,000 May Budgeted Income Statements April Sales. $100,000 Cost of goods sold ….. 60,000 Gross margin …… 40,000 Selling and administrative expenses…… 15,000 Net operating income… $ 25,000 $110,000 66,000 44,000 16,500 $ 27,500 $130,000 78,000 52,000 19,500 $ 32,500 Budgeting Assumptions: 1. Sixty percent of sales are cash sales and 40% of sales are credit sales.
Twenty percent of all credit sales are collected in the month of sale and the remaining 80% are collected in the month subsequent to the sale. 2. Budgeted sales for July are $140,000 3. “Ten percent of merchandise inventory purchases are paid in cash at the time of the purchase. The remaining 90% of purchases are credit purchases. All purchases on credit are paid in the month subsequent to the purchase. 4. Each month's ending merchandise inventory should equal $10,000 plus 50% of the next month's cost of goods sold. 5. The depreciation expense is $1,000 per month. All other selling and administrative expenses are paid in full in the month the expense is incurred. Required: 1. Calculate the expected cash collections for April, May, and June. 2. Calculate the budgeted merchandise purchases for April, May, and June. 3. Calculate the expected cash disbursements for merchandise purchases for April, May, and June 4. Prepare a budgeted balance sheet at June 30. (Hint: You need to calculate the cash paid for selling and administrative expenses during April, May, and June to determine the cash balance in your June 30 balance sheet.) Get Accounting homework help today