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Colerain Corporation is a merchandising company that is preparing a profit plan for the third quarter of the calendar year. The company’s balance sheet as of June 30 is shown below: |
| Colerain Corporation Balance Sheet June 30 |
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| Assets | |
| Cash | $ 85,000 |
| Accounts receivable | 122,000 |
| Inventory | 51,450 |
| Plant and equipment, net of depreciation | 220,000 |
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| Total assets | $ 478,450 |
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| Liabilities and Stockholders’ Equity | |
| Accounts payable | $ 61,900 |
| Common stock | 350,000 |
| Retained earnings | 66,550 |
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| Total liabilities and stockholders’ equity | $ 478,450 |
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| Colerain’s managers have made the following additional assumptions and estimates: |
| 1. |
Estimated sales for July, August, September, and October will be $210,000, $230,000, $220,000, and $240,000, respectively. |
| 2. |
All sales are on credit and all credit sales are collected. Each month’s credit sales are collected 30% in the month of sale and 70% in the month following the sale. All of the accounts receivable at June 30 will be collected in July. |
| 3. |
Each month’s ending inventory must equal 35% of the cost of next month’s sales. The cost of goods sold is 70% of sales. The company pays for 50% of its merchandise purchases in the month of the purchase and the remaining 50% in the month following the purchase. All of the accounts payable at June 30 will be paid in July. |
| 4. |
Monthly selling and administrative expenses are always $60,000. Each month $4,000 of this total amount is depreciation expense and the remaining $56,000 relates to expenses that are paid in the month they are incurred. |
| 5. |
The company does not plan to borrow money or pay or declare dividends during the quarter ended September 30. The company does not plan to issue any common stock or repurchase its own stock during the quarter ended September 30. |
| Required: |
| 1. |
Prepare a schedule of expected cash collections for July, August, and September. Also compute total cash collections for the quarter ended September 30th.(Leave no cells blank be certain to enter “0” wherever required. Omit the “$” sign in your response.) |
| Schedule of Expected Cash Collections | ||||
| July | August | September | Quarter | |
| From accounts receivable | $ | $ | $ | $ |
| From July sales | ||||
| From August sales | ||||
| From September sales | ||||
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| Total cash collections | $ | $ | $ | $ |
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| 2a. |
Prepare a merchandise purchases budget for July, August, and September. Also compute total merchandise purchases for the quarter ended September 30th.(Input all amounts as positive values. Omit the “$” sign in your response.) |
| Merchandise Purchases Budget | ||||
| July | August | September | Total | |
| Budgeted cost of goods sold | $ | $ | $ | $ |
| (Click to select)Deduct:Add:(Click to select)Beginning inventoryEnding inventory | ||||
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| Total needs | ||||
| (Click to select)Deduct:Add:(Click to select)Ending inventoryBeginning inventory | ||||
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| Required purchases | $ | $ | $ | $ |
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| 2b. |
Prepare a schedule of expected cash disbursements for merchandise purchases for July, August, and September. Also compute total cash disbursements for merchandise purchases for the quarter ended September 30th.(Leave no cells blank be certain to enter “0” wherever required. Omit the “$” sign in your response.) |
| Schedule of Expected Cash Disbursements—Merchandise Purchases | ||||
| July | August | September | Total | |
| From accounts payable | $ | $ | $ | $ |
| For July purchases | ||||
| For August purchases | ||||
| For September purchases | ||||
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| Total cash disbursements | $ | $ | $ | $ |
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| 3. |
Prepare an income statement for the quarter ended September 30th.(Input all amounts as positive values except losses which should be indicated by a minus sign.Leave no cells blank be certain to enter “0” wherever required.Omit the “$” sign in your response.) |
| Colerain Corporation Income Statement For the Quarter Ended September 30 |
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| (Click to select)Selling and administrative expensesNet income (loss)Net operating income (loss)SalesGross marginInterest expenseCost of goods sold | $ |
| (Click to select)Gross marginInterest expenseSelling and administrative expensesSalesNet operating income (loss)Cost of goods soldNet income (loss) | |
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| (Click to select)Net operating income (loss)SalesSelling and administrative expensesGross marginInterest expenseNet income (loss)Cost of goods sold | |
| (Click to select)SalesSelling and administrative expensesGross marginNet operating income (loss)Interest expenseNet income (loss)Cost of goods sold | |
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| (Click to select)Interest expenseSelling and administrative expensesNet operating income (loss)Gross marginSalesCost of goods soldNet income (loss) | |
| (Click to select)Cost of goods soldSelling and administrative expensesNet operating income (loss)SalesNet income (loss)Gross marginInterest expense | |
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| (Click to select)Selling and administrative expensesSalesInterest expenseCost of goods soldGross marginNet income (loss)Net operating income (loss) | $ |
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| 4. |
Prepare a balance sheet as of September 30th.(Be sure to list the assets and liabilities in order of their liquidity. Omit the “$” sign in your response.) |
| Colerain Corporation Balance Sheet September 30 |
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| Assets | |
| (Click to select)Notes payableRetained earningsCashCapital stockAccounts payable | $ |
| (Click to select)Notes payableRetained earningsCapital stockAccounts receivableAccounts payable | |
| (Click to select)Retained earningsAccounts payableInventoryPlant and equipment, netCapital stock | |
| (Click to select)Capital stockAccounts payableInventoryPlant and equipment, netRetained earnings | |
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| Total assets | $ |
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| Liabilities and Stockholders’ Equity | |
| (Click to select)CashAccounts payableNotes receivableInventoryAccounts receivable | $ |
| (Click to select)Capital stockAccounts receivablePlant and equipment, netInventoryCash | |
| (Click to select)Accounts receivablePlant and equipment, netInventoryRetained earningsCash | |
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| Total liabilities and stockholders’ equity | $ |
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