Question
Dilbert Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: o Sales are budgeted at $260,000
Dilbert Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: o Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January. o Collections are expected to be 80% in the month of sale, 19% in the month following the sale, and 1% uncollectible. o The cost of goods sold is 65% of sales. o The company desires to have an ending merchandise inventory at the end of each month equal to 60% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase. o Other monthly expenses to be paid in cash are $20,300. o Monthly depreciation is $20,000. o Ignore taxes.
Balance Sheet October 31 | |
Assets | |
Cash | $27,000 |
Accounts receivable, net of allowance for uncollectible accounts | 79,000 |
Merchandise inventory | 101,400 |
Property, plant and equipment, net of $574,000 accumulated depreciation | 1,082,000 |
Total assets | $1,289,400 |
Liabilities and Stockholders' Equity | |
Accounts payable | $169,000 |
Common stock | 740,000 |
Retained earnings | 380,400 |
Total liabilities and stockholders' equity | $1,289,400 |
The net income for December would be:
$37,900
$60,200
$40,200
$55,800
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