Solved: The projected October 31 2011 balance sheet for

Blanco Co
The projected October 31 2011 balance sheet for Blanco Co

The projected October 31, 2011, balance sheet for Blanco Co. follows:
ASSETS
Cash .............................. $28,000,000
Accounts Receivable (net of Allowance for Uncollectibles of $3,000,000).... 57,000,000
Inventory ............................. 52,500,000
Property, Plant, and Equipment (net of Accumulated Depreciation of $37,500,000) 112,500,000
Total Assets ........................ $250,000,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts Payable ........................ $165,000,000
Common Stock ......................... 120,000,000
Retained Earnings (deficit) .................... (35,000,000)
Total Liabilities and Stockholders’ Equity ............. $250,000,000
Additional information is as follows:
• Sales for November and December are budgeted at $330,000,000 and $360,000,000,
respectively.
• Collections are expected to be 70 percent in the month of sale, 28 percent in the following
month, and 2 percent uncollectible.
• The company’s gross profit is projected at 30 percent of sales.
• Purchases each month are 70 percent of the following month’s projected sales.
Purchases are paid in full in the month following the purchase.
• Other monthly cash expenses are $46,500,000. Monthly depreciation is $15,000,000.
a. Prepare a budgeted income statement for November 2011.
b. Prepare a budgeted balance sheet for November 2011.
c. Describe any special problems this company may encounter because of its weak balance
sheet. Recommend actions the firm might take to improve the balance sheet.

The projected October 31 2011 balance sheet for Blanco Co

ANSWER
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