Reference no: EM132593772
Millen Corporation is a merchandiser that is preparing a master budget for the month of July. The company's balance sheet as of June 30 is shown below:
Millen CorporationBalance SheetJune 30
Assets
Cash$120,000
Accounts receivable 166,000
Inventory 37,200
Plant and equipment, net of depreciation 554,800
Total assets$878,000
Liabilities and Stockholders' Equity
Accounts payable$93,000
Common stock 586,000
Retained earnings 199,000
Total liabilities and stockholders' equity$878,000
Millen's managers have made the following additional assumptions and estimates:
- Estimated sales for July and August are $310,000 and $330,000, respectively.
- Each month's sales are 20% cash sales and 80% credit sales. 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.
- Each month's ending inventory must equal 20% of the cost of next month's sales. The cost of goods sold is 60% of sales. The company pays for 40% of its merchandise purchases in the month of the purchase and the remaining 60% in the month following the purchase. All of the accounts payable at June 30 will be paid in July.
- Monthly selling and administrative expenses are always $70,000. Each month $10,000 of this total amount is depreciation expense and the remaining $60,000 relates to expenses that are paid in the month they are incurred.
- The company does not plan to buy or sell any plant and equipment during July. It will not borrow any money, pay a dividend, issue any common stock, or repurchase any of its own common stock during July.
Required:
Question 1. Calculate the expected cash collections for July.
Question 2. Calculate the expected cash disbursements for merchandise purchases for July.
Question 3. cash budget for July.