Thursday, 2 August 2012

The balance sheet of Phototec, Inc., a distributor of photographic supplies, as of May 31 is given below:

The balance sheet of Phototec, Inc., a distributor of photographic supplies, as of May 31 is given below:

Phototec, Inc.
Balance Sheet
May 31
Assets
  Cash $ 8,000  
  Accounts receivable   72,000  
  Inventory   30,000  
  Buildings and equipment, net of depreciation   500,000
 

  Total assets $ 610,000
 



Liabilities and Stockholders' Equity
  Accounts payable $ 90,000  
  Note payable   15,000  
  Capital stock   420,000  
  Retained earnings   85,000
 

  Total liabilities and stockholders' equity $ 610,000
 





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

a.
Sales are budgeted at $250,000 for June. Of these sales, $60,000 will be for cash; the remainder will be credit sales. One-half of a month’s credit sales are collected in the month the sales are made, and the remainder is collected the following month. All of the May 31 accounts receivable will be collected in June.
b.
Purchases of inventory are expected to total $200,000 during June. These purchases will all be on account. Forty percent of all inventory purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the May 31 accounts payable to suppliers will be paid during June.
c. The June 30 inventory balance is budgeted at $40,000.
d.
Selling and administrative expenses for June are budgeted at $51,000, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,000 for the month.
e.
The note payable on the May 31 balance sheet will be paid during June. The company’s interest expense for June (on all borrowing) will be $500, which will be paid in cash.
f. New warehouse equipment costing $9,000 will be purchased for cash during June.
g.
During June, the company will borrow $18,000 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.
   
Required:
1a.
Prepare schedule of expected cash collections from sales and a schedule of expected cash disbursements for inventory purchases. (Omit the "$" sign in your response.)
    
Schedule of Expected Cash Collections
  Cash sales-June $ 60,000 correct  
  Collections on accounts receivable:   
     May 31 balance 72,000 correct  
     June 95,000 correct  
    
  Total cash receipts $ 227,000 correct  
    


  
Schedule of Expected Cash Disbursements
  May 31 accounts payable balance   $ 90,000 correct  
  June purchases    80,000 correct  
    
  Total cash payments   $ 170,000 correct  
 


   
1b.
Prepare a cash budget for June. (Input all amounts as positive values except cash deficiency, repayments and interest which should be indicated by a minus sign. Omit the "$" sign in your response.)
   
Phototec, Inc.
Cash Budget
For the Month of June
  Cash balance, beginning $ 8,000  correct  
  Add receipts from customers 227,000 correct  
    
  Total cash available   235,000 correct  
    
  Less disbursements:     
     Purchase of inventory 170,000 correct  
     Selling and administrative expenses   51,000 correct  
     Purchases of equipment   9,000 correct  
    
  Total cash disbursements   230,000 correct  
    
  Excess of receipts over disbursements   5,000 correct  
    
  Financing:     
     Borrowings-note   18,000 correct  
     Repayments-note   -15,000 correct  
     Interest   -500  correct  
    
  Total financing   2,500  correct  
    
  Cash balance, ending   $ 7,500 correct  
 


   
2.
Prepare a budgeted income statement for June. (Input all amounts as positive values. Omit the "$" sign in your response.)

Phototec, Inc.
Budgeted Income Statement
For the Month of June
  Sales correct     $ 250,000 correct  
  Cost of goods sold:        
     Beginning inventory correct $ 30,000 correct     
     Purchases correct 200,000 correct     
    
  
     Goods available for sale correct 230,000 correct     
     Ending inventory correct 40,000 correct     
    
  
     Cost of goods sold correct    190,000 correct  
       
  Gross margin correct    60,000 correct  
  Selling and administrative expenses correct    53,000 correct  
       
  Net operating income (loss) correct    7,000 correct  
  Interest expense correct    500  correct  
       
  Net income (loss) correct    $ 6,500 correct  
   


   
3. Prepare a budgeted balance sheet as of June 30. (Be sure to list the assets and liabilities in order of their liquidity. Omit the "$" sign in your response.)

Phototec, Inc.
Budgeted Balance Sheet
June 30
  Assets
  Cash correct $ 7,500 correct  
  Accounts receivable correct 95,000 correct  
  Inventory correct 40,000 correct  
  Buildings and equipment, net of depreciation correct   507,000 correct  
    
  Total assets   $ 649,500 correct  
 

       
Liabilities and Stockholders' Equity    
  Accounts payable correct $ 120,000 correct  
  Note payable correct 18,000 correct  
  Capital stock correct 420,000 correct  
  Retained earnings correct 91,500 correct  
    
  Total liabilities and equity   $ 649,500 correct