Exercise 929

Budgeted Financial Statements; Retailer

Eastside Hardware is a retail hardware store. Information about the stores operations follows.

November 20x1 sales amounted to $200,000.

Sales are budgeted at $220,000 for December 20x1 and $200,000 for January 20x2.

Collections are expected to be 60 percent in the month of sale and 38 percent in the month following the sale. Two percent of sales are expected to be uncollectible. Bad debts expense is recognized monthly.

The stores gross margin is 25 percent of its sales revenue.

A total of 80 percent of the merchandise for resale is purchased in the month prior to the month of sale, and 20 percent is purchased in the month of sale. Payment for merchandise is made in the month following the purchase.

Other monthly expenses paid in cash amount to $22,600.

Annual depreciation is $216,000.

The companys balance sheet as of November 30, 20x1, is as follows:EASTSIDE HARDWARE, INC.

Balance Sheet

November 30, 20x1

Assets

Cash $ 22,000

Accounts receivable (net of $3,500 allowance for uncollectible accounts) 76,000

Inventory 140,000

Property, plant, and equipment (net of $590,000 accumulated depreciation) 862,000

Total assets $1,100,000

Liabilities and Stockholders EquityAccounts payable $162,000

Common stock 795,000

Retained earnings 143,000

Total liabilities and stockholders equity $1,100,000

Required:

1. The budgeted cash collections for December 20x1
2. The Budgeted income (loss) before income taxes for DEcember 20x1
3. The Prjected Baance in account payable on December 31, 20x1