Reference no: EM132288896
Question - Village Hardware is a retail hardware store. Information about the store's operations follows.
- November sales amounted to $540,000.
- Sales are budgeted at $580,000 for December and $540,000 for January
- 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 store's gross margin is 25 percent of its sales revenue.
- A total of 70 percent of the merchandise for resale is purchased in the month prior to the month of sale, and 30 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 $46,600.
- Annual depreciation is $474,000. The company's balance sheet as of November 30 is as follows:
VILLAGE HARDWARE, INC. BALANCE SHEET NOVEMBER 30,
Cash $58,000
Accounts receivable (net of $8,400 allowance for uncollectible accounts) 166,000
Inventory 420,000
Property, plant, and equipment (net of $1,320,000 accumulated depreciation) 1,864,000
Total assets$2,508,000
LIABILITIES AND OWNER'S EQUITY
Accounts payable $426,000
Common stock 1,730,000
Retained earnings 352,000
Total liabilities and owner's equity $2,508,000
Required -
1. Compute the budgeted cash collections for December.
2. Compute the budgeted income (loss) before income taxes for December.
3. Compute the projected balance in accounts payable on December 31.
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