6. Mikell supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow:
Sales are budgeted at $360,000 for November, $380,000 for December, and $350,000 for January. Collections are expected to be 75% in the month of sale and 25% in the month following the sale. The cost of goods sold is 65% of sales. The company maintains a targeted ending inventory of 60% of the following month's sales. Payment for merchandise is made in the month following the purchase. Other monthly expenses to be paid in cash are $21,900. Monthly depreciation is $20,000.
a. Prepare a Schedule of Expected Cash Collections for November and December.
b. Prepare a Merchandise Purchases Budget for November and December.
c. Prepare Cash Budgets for November and December.
d. Prepare a Budgeted Income Statement for the two month period of November and December.
e. Prepare a Budgeted Balance Sheet for the end of December.
The solution examines Mikell Supplies store operations.