Refer to Questions 3-24 to 3-27.

Required:

Prepare a projected income statement for the second quarter of this financial year.

Question 3-24

Jaime’s Hat Shop sells hats with school logos on them for $22 each. This year, Jaime’s expects to sell 350 hats in August, 300 in September, 400 in October, 800 in November, 1040 in December and 750 in January. On average, 25 per cent of customers purchase on credit. Jaime’s allows those customers to pay for their purchases the month after they have made their purchases.

Question 3-25

Refer to 3-24. Jaime’s business policy is to plan to end each month with an ending inventory equal to 20 per cent of the next month’s projected sales. Jaime’s pays $8 for each hat that it purchases. Jaime’s and its supplier have an arrangement that allows Jaime’s to pay for each purchase 60 days after the purchase.

Question 3-26

Refer to Question 3-24. Assume Jaime’s ended the first quarter of this financial year with 60 hats on hand.

Question 3-27

Refer to Question 3-24. Jaime’s Hat Shop expects to incur the following expenses for each month of the second quarter of this financial year:

In April, Jaime’s had prepaid the rent for the whole year. Jaime’s plans to pay for all the other expenses in the month they occur.

Transcribed Image Text:

Rent (30% general and administrative, 70% selling) Utilities (30% general and administrative, 70% selling) Advertising Salaries (50% general and administrative, 50% selling) Commissions (for each hat sold) $1 200 600 400 5000 2