Question: The Lynbrook Company is a wholesale distributor of premium fabric. The company's balance sheet as of April 30, 2017 is given below: The Lynbrook Company Balance Sheet April 30, 2017 Assets Cash 9,000 Accounts Receivable 54,000 Inventory 30,000 Buildings and Equipment, net 207,000 Total Assets 300,000 Liabilities and Equity Accounts Payable 63,000 Note Payable 14,500 Capital Stock, no par 180,000 Retained Earnings 42,500 Total Liabilities and Equity 300,000 The company is in the process of preparing budget data for May. A number of budget items have already been prepared, as stated below:
a. Sales are budgeted at $200,000 for May. Of these sales, $60,000 will be for cash; the remainder will be credit sales. One-half of a month's credit sales are collected in the month the sales are made, and the remainder is collected in the following month. All of the April 30 accounts receivable will be collected in May.
b. Purchases of inventory are expected to total $120,000 during May. These purchases will all be on account. Forty percent of all purchases are paid for in the month of purchase; the remainder are paid in the following month. All of the April 30 accounts payable to suppliers will be paid during May.
c. The May 31 inventory balance is budgeted at $40,000.
d. Selling and administrative expenses for May are budgeted at $72,000, exclusive of depreciation. These expenses will be paid in cash. Depreciation is budgeted at $2,000 for the month.
e. The note payable on the April 30 balance sheet will be paid during May, with $100 in interest. (All of the interest relates to May.)
f. New refrigerating equipment costing $6,500 will be purchased for cash during May.
g. During May, the company will borrow $20,000 from its bank by giving a new note payable to the bank for that amount. The new note will be due in one year.
Required: 1. Prepare a cash budget for May. Support your budget with a schedule of expected cash collections from sales and a schedule of expected cash disbursements for merchandise purchases (similar to Exhibit 20.14 and 20.15 in your text).
2. Prepare a budgeted income statement for May. Use the income statement format as shown on page 891 in your text.
3. Prepare a budgeted balance sheet as of May 31, 2017.