Ozark Distributing Company is primarily engaged in the wholesale distribution of consumer products in the Ozark Mountain regions

E 18-8 Reporting preferred shares

Ozark Distributing Company is primarily engaged in the wholesale distribution of consumer products in the Ozark Mountain regions. The following disclosure note appeared in the company's 2011 annual report:

Note 5. CONVERTIBLE PREFERRED STOCK (in part):
The Company has the following Convertible Preferred Stock outstanding as of September 2011:
Date of issuance: June 17, 2008
Optionally redeemable beginning June 18, 2010
Par value (gross proceeds): $2,500,000
Number of shares: 100,000
Liquidation preference per share: $25.00
Conversion price per share: $30.31
Number of common shares in which to be converted: 82,481
Dividend rate: 6.785%

The Preferred Stock is convertible at any time by the holders into a number of shares of Ozark's common stock equal to the number of preferred shares being converted times a fraction equal to $25.00 divided by the conversion price. The conversion prices for the Preferred Stock are subject to customary adjustments in the event of stock splits, stock dividends and certain other distributions on the Common Stock. Cumulative dividends for the Preferred Stock are payable in arrears, when, as and if declared by the Board of Directors, on March 31, June 30, September 30 and December 31 of each year.

The Preferred Stock is optionally redeemable by the Company beginning on various dates, as listed above, at redemption prices equal to 112% of the liquidation preference. The redemption prices decrease 1% annually thereafter until the redemption price equals the liquidation preference after which date it remains the liquidation preference.

Required:
1. What amount of dividends is paid annually to a preferred shareholder owning 100 shares of the Series A preferred stock?
2. If dividends are not paid in 2012 and 2013, but are paid in 2014, what amount of dividends will the shareholder receive?
3. If the investor chooses to convert the shares in 2012, how many shares of common stock will the investor receive for his/her 100 shares?
4. If Ozark chooses to redeem the shares on June 18, 2012, what amount will the investor be paid for his/her 100 shares?

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(Cash Budget; Income Statement; Balance Sheet) Minden Company is a wholesale distributor of premium European chocolates

PROBLEM 9-19 Cash Budget; Income Statement; Balance Sheet

Minden Company is a wholesale distributor of premium European chocolates. The company’s balance sheet as of April 30 is given below:

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Units to be produced . . . . . . 5,000 8,000 7,000 6,000

Minden Company
Balance Sheet
April 30
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,000
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000
Buildings and equipment, net of depreciation . . . . . . . . . . . . . . . . . . 207,000
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $300,000
Liabilities and Stockholders’ Equity
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 63,000
Note payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,500
Capital stock, no par . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,500
Total liabilities and stockholders’ 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.
2. Prepare a budgeted income statement for May. Use the absorption costing income statement format as shown in Schedule 9.
3. Prepare a budgeted balance sheet as of May 31.

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