Budgeting Cash Whitney's, Inc., sells on terms of 5% discount for "cash and carry" or 2/10, n/30 and estimates its total sales for the second calendar quarter of next year as follows: April, $300,000; May, $240,000; and June. $360,000. An analysis of operations indicates the following customer col- lection pattems Portions of Total Sales 30% 15% 10% In month of sale: Cash at time of sale. On account during discount period. On account after discount period In month following sale: On account during discount period. On account after discount period In second month following sale: On account after discount period Average portion uncollectible.... 15% 10% 15% 5% 100% Prepare an estimate of the cash to be collected from customers during June. Prepare and Evaluate Budgeted Income Statement Fairfield Stores, a retailer in a shopping mall. prepared the following income statement for its operations for the month just ended: FAIRFIELD STORES Income Statement For the Month Ended April 30, 2019 $500,000 240.000 $260.000 Sales. Cost of goods sold Gross profit... Operating expenses: Sales commissions expense. Advertising expense Lease expense Depreciation expense Salaries expense Other operating expenses. Income before income taxes Income tax expense Net income $25,000 60,000 20,000 10,000 30,000 15,000 160,000 $100,000 30,000 $ 70.000 Sales commissions were 5% of sales. Income taxes were 30% of income before income taxes. Both should continue at the same rate for the remainder of the year. Fairfield Stores is preparing the budget for the month of May 2019. If no basic changes are made, Fairfield's management expects that the income statement would be virtually identical to the one for April. However, Fairfield's management has decided to make some changes in the operations. The plans include the following: 1. Increase advertising expense by 40%. 2. Decrcase all selling prices by 10%. 3. Increase the number of units sold by 25% as a result of the first two changes. Required a. Prepare a budgeted income statement for the month of May 2019. (Round all amounts on the income statement to the nearest dollar.) b. Should Fairfield's management make the planned changes? Budgeting Cash Whitney's, Inc., sells on terms of 5% discount for "cash and carry" or 2/10, n/30 and estimates its total sales for the second calendar quarter of next year as follows: April, $300,000; May, $240,000; and June. $360,000. An analysis of operations indicates the following customer col- lection pattems Portions of Total Sales 30% 15% 10% In month of sale: Cash at time of sale. On account during discount period. On account after discount period In month following sale: On account during discount period. On account after discount period In second month following sale: On account after discount period Average portion uncollectible.... 15% 10% 15% 5% 100% Prepare an estimate of the cash to be collected from customers during June. Prepare and Evaluate Budgeted Income Statement Fairfield Stores, a retailer in a shopping mall. prepared the following income statement for its operations for the month just ended: FAIRFIELD STORES Income Statement For the Month Ended April 30, 2019 $500,000 240.000 $260.000 Sales. Cost of goods sold Gross profit... Operating expenses: Sales commissions expense. Advertising expense Lease expense Depreciation expense Salaries expense Other operating expenses. Income before income taxes Income tax expense Net income $25,000 60,000 20,000 10,000 30,000 15,000 160,000 $100,000 30,000 $ 70.000 Sales commissions were 5% of sales. Income taxes were 30% of income before income taxes. Both should continue at the same rate for the remainder of the year. Fairfield Stores is preparing the budget for the month of May 2019. If no basic changes are made, Fairfield's management expects that the income statement would be virtually identical to the one for April. However, Fairfield's management has decided to make some changes in the operations. The plans include the following: 1. Increase advertising expense by 40%. 2. Decrcase all selling prices by 10%. 3. Increase the number of units sold by 25% as a result of the first two changes. Required a. Prepare a budgeted income statement for the month of May 2019. (Round all amounts on the income statement to the nearest dollar.) b. Should Fairfield's management make the planned changes
