Somberg Company is a retail sporting goods store that uses an accrual accounting system Facts regarding its operations follow Sales are budgeted at $270,000 for December and $240,000 for January, terms 1 eom, n 60 Collections are expected to be 50 in the month of sale and 48 in the month following the sale Two percent of sales are expected to be uncollectible and recorded in an allowance account at the end of the month of sale Bad debts expense is included as part of operating expenses Gross margin is 30 of gross sales All accounts receivable are from credit sales Bad debts are written off against the allowance account at the end of the month following the month of sale Somberg desires to have 80 of the merchandise for the following month's sales on hand at the end of each month Payment for merchandise is made in the month following the month of purchase Other monthly operating expenses to be paid in cash total $21,600 Annual depreciation is $192,000, one twelfth of which is reflected as part of monthly operating expenses Somberg Company's statement of financial position at the close of business on November 30 follows Somberg COMPANY Statement of Financial Position November 30, 2019 Assets Cash $22,000 Accounts receivable 64,000 (net of $4,000 allowance for doubtful accounts) Inventory 151,200 Property, plant, and equipment 1,000,000(net of $620,000 accumulated depreciation) Total assets 1,237,200 Liabilities and Stockholders' Equity Accounts payable $142,000 Common stock800,000 Retained earnings295,200 Total liabilities and equity$1,237,200 Required 1 What is the total of budgeted cash collections for December 2 How much is the book value of accounts receivable at the end of December 3 How much is the income (loss) before income taxes for December 4 What is the projected balance in inventory on December 31, 2019 5 What are budgeted purchases for December 6 What is the projected balance in accounts payable on December 31, 2019 (For all requirements, Do not round intermediate calculations )

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on May 13, 2024

Somberg Company is a retail sporting goods store that uses an accrual accounting system. Facts regarding its operations follow:

Sales are budgeted at $270,000 for December and $240,000 for January, terms 1/eom, n/60.
Collections are expected to be 50% in the month of sale and 48% in the month following the sale. Two percent of sales are expected to be uncollectible and recorded in an allowance account at the end of the month of sale. Bad debts expense is included as part of operating expenses.
Gross margin is 30% of gross sales.
All accounts receivable are from credit sales. Bad debts are written off against the allowance account at the end of the month following the month of sale.
Somberg desires to have 80% of the merchandise for the following month's sales on hand at the end of each month. Payment for merchandise is made in the month following the month of purchase.
Other monthly operating expenses to be paid in cash total $21,600.
Annual depreciation is $192,000, one-twelfth of which is reflected as part of monthly operating expenses.

Somberg Company's statement of financial position at the close of business on November 30 follows:

Somberg COMPANY

Statement of Financial Position November 30, 2019

Assets:

Cash $22,000

Accounts receivable 64,000 (net of $4,000 allowance for doubtful accounts)

Inventory 151,200

Property, plant, and equipment 1,000,000(net of $620,000 accumulated depreciation)

Total assets 1,237,200

Liabilities and Stockholders' Equity:

Accounts payable $142,000

Common stock800,000