Question

Wolfpack Company is a merchandising company that is preparing a budget for the month of July. It has provided the following information:
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:
All sales are on account. Thirty percent of the credit sales are collected in the month of sale and the remaining 70% are collected in the month subsequent to the sale. The accounts receivable at June 30 will be collected in July.
All merchandise purchases are on account. Twenty percent of merchandise inventory purchases are paid in the month of the purchase and the remaining 80% is paid in the month after the purchase.
The budgeted inventory balance at July 31 is $22,000.
Depreciation expense is $3,000 per month. All other selling and administrative expenses are paid in full in the month the expense is incurred.
The company’s cash budget for July shows expected cash collections of $77,000, expected cash disbursements for merchandise purchases of $44,500, and cash paid for selling and administrative expenses of $15,000.
Prepare a balanced budget sheet as of July 1st.

Answer 1

Answer:

Wolfpack Company

Balanced Budget Sheet as of July 1st:

Wolfpack Company

Balance Sheet  as of June 30

Assets

Cash                                                                   $ 92,500

Accounts receivable                                             63,000

Inventory                                                               22,000

Buildings and equipment, net of depreciation  147,000

Total assets                                                    $ 324,500

Liabilities and Stockholders’ Equity

Accounts payable                                            $ 36,800

Common stock                                                  100,000

Retained earnings                                             187,700

Total liabilities and stockholders’ equity     $ 324,500

Explanation:

a) Data

Wolfpack Company

Balance Sheet  as of 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

b) Accounts Receivable

Beginning balance = 50,000

Sales                          90,000

Cash receipts:

30%                           (27,000)

June balance           (50,000)   Total receipts = $77,000

Ending balance         63,000

30% receipts = $27,000 ($77,000 - 50,000)

Sales = $27,000/30% = $90,000

Ending balance = $63,000 ($90,000 x 70%)

c) Accounts Payable

Beginning balance         35,300

Purchases                      46,000

Payments:

20%                                 (9,200)

June balance                (35,300) Disbursement = $44,500

Ending balance (80%)   36,800

20% cash payment = $9,200 ($44,500 - 35,300)

Purchases = $46,000 (9,200/20%)

Ending balance = $36,800 ($46,000 x 80%)

d) Cost of goods sold:

Beginning Inventory     30,000

Purchases                     46,000

Available for sale          76,000

Ending inventory        (22,000)

Cost of goods sold      54,000

Depreciation $3,000

e) Income Statement for July

Sales                         90,000

Cost of goods sold  54,000

Gross profit             36,000

Depreciation            (3,000)

Selling & Admin      (15,000)

Net Income            $18,000

f) Retained Earnings:

Beginning balance  $169,700

Net income                  18,000

Ending balance       $187,700

g( Cash balance:

Beginning balance $75,000

Cash collections       77,000

Cash disbursements:

Purchases               (44,500)

Selling & admin       (15,000)

Ending balance     $92,500