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question colerain corporation is a merchandising company that ispreparing a profit p 4286434

Question

Colerain Corporation is a merchandising company that ispreparing 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

Assets

 

  Cash

$  84,000

  Accountsreceivable

121,000

  Inventory

50,050

  Plant and equipment,net of depreciation

210,000

 

 

  Total assets

$ 465,050

 

 

Liabilities and Stockholders? Equity

 

  Accountspayable

$  61,500

  Common stock

370,000

  Retainedearnings

33,550

 

 

  Total liabilitiesand stockholders? equity

$ 465,050

 

 

 

   

 

Colerain?s managers have madethe following additional assumptions and estimates:

 

1.

Estimated sales for July, August, September, and October will be$220,000, $240,000, $230,000, and $250,000, respectively.

2.

All sales are on credit and all credit sales are collected. Eachmonth?s credit sales are collected 35% in the month of sale and 65%in the month following the sale. All of the accounts receivable atJune 30 will be collected in July.

3.

Each month?s ending inventory must equal 35% of the cost of nextmonth?s sales. The cost of goods sold is 65% of sales. The companypays for 50% of its merchandise purchases in the month of thepurchase 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 andthe remaining $56,000 relates to expenses that are paid in themonth they are incurred.

.

The company does not plan to borrow money or pay or declaredividends during the quarter ended September 30. The company doesnot plan to issue any common stock or repurchase its own stockduring the quarter ended September 30.

1) Prepare a schedule of expected cash collections forJuly, August and September. Also compute total cash collections forthe quarter ended September 30th.

From Accounts Receivable ? ? ? ?

From July Sales ? ? ? ?

From August Sales ? ? ? ?

From September Sales ? ? ? ?

Total Cash Collections ? ? ? ?

2)

A) Prepare a merchandise purchases budget for July,August and September. Also compute total merchandise purchases forthe quarter ended September 30th.

Budgeted Cost of goods Cost ????

Add: Ending Inventory ????

Total Needs ????

Deduct: Beginning Inventory ????

Required Purchases ????

B) Prepare a schedule of expected cash disbursments formerchandise purchases for July, August and September. Also computetotal cash disbursments for merchadise purchases for the quarterended September 30th.

From AP ????

July ????

August ????

Sept. ????

Total Cash Disbusrments ????

3) Prepare an income statement for the quarter endedSept 30th.

Sales

COGS

Gross Margin

Selling and Admin Exp

Net Operating Income (loss)

Interast Expense

Net Income (loss)

4)Prepare a balance sheet as of Sept30th.

Assets:

Cash

AR

Inventory

Plant & Equipment

Total Assets:

Liabilities & Stockholders Equity:

AP

Capital Stock

Retained Earnings

Total L&E

 

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