06 Feb for it. The company will need to pay
Accounting
Case #2 (Chapter 9)
Highlands Company’s balance sheet shows the following:
Highlands Company
Balance Sheet August 31
Assets
Cash ……………………………………………………………………………………………………. $ 7,000 Accounts receivable …………………………………………………………………………….. 54,000 Inventory …………………………………………………………………………………………….. 30,000 Buildings and equipment, net of depreciation ………………………………………….. 207,000 Total assets ………………………………………………………………………………………….. $298,000
Liabilities and Stockholders’ Equity Accounts payable ………………………………………………………………………………… $ 61,000 Note payable ………………………………………………………………………………………… 14,500 Common stock……………………………………………………………………………………… 180,000 Retained earnings ………………………………………………………………………………… 42,500 Total liabilities and stockholders’ equity ………………………………………………….. $298,000
The company is preparing a budget for September and its accounting records show the following:
a. The September’s sales budget is $200,000. Thirty percent of the budgeted sales are expected to be cash sales. Seventy percent of the sales are expected to be credit sales. Fifty percent of the credit sales are expected to be collected during September. Another fifty percent are expected to be collected during October. All of the August accounts receivables are expected to be collected in September.
b. During September, purchases of inventory will be $120,000 which will be on credit. Of these purchases, $48,000 will be paid for in September and the remainder will be paid in October. The company will pay all of its August accounts payable to suppliers in September.
c. The inventory balance at the end of September is expected to be $40,000. d. Selling, general, and administrative expenses are expected to be $72,000, which will be paid in
cash in September. In addition to $72,000, depreciation expense is expected to be $2,000 in September.
e. In September, the company will pay all of its August note payable balance. It will also pay $500 interest, which relates to September.
f. The company will buy new equipment at $6,500 with cash in September. g. In September, $20,000 will be borrowed from a bank and the company will sign a note payable
for it. The company will need to pay its new note payable a year later. Required: For September, prepare the followings.
1. Cash budget (10 points). 2. Budgeted income statement (10 points).
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