Prepare a budgeted income statement, Financial Accounting

Assignment Help:

The Schrödinger Science Store operates a retail store
in a local shopping mall.The results of operations for the fourth quarter of 2011 are as follows:
Sales $350,000
Less cost of sales 205,000
Gross margin 145,000
Less selling,general,and administrative expenses 45,000
Income before taxes 100,000
Less income taxes 40,000
Net income $ 60,000

Additional information:
1. Sales and cost of sales are expected to increase by 15 percent in each of the next twoquarters.
2. Seventy percent of sales are collected in the quarter of sale,and 25 percent are collected in the quarter following sale.
3. The balance in accounts receivable at the end of 2011 relates to sales in the fourth quarter of 2011.
4. Inventory purchases in the fourth quarter of 2011 are $200,000.
5. The balance in accounts payable at the end of 2011 relates to purchases in the fourth quarter of 2011.
6. Inventory at the end of 2011 is $150,000.The company plans to hold ending inventory equal to 70 percent of subsequent quarter cost of sales.
7. Selling,general,and administrative expenses are expected to increase by $10,000 owing to increases in advertising and salaries.All other expenses in this category are expected to remain constant.
8. Fifty percent of inventory purchases are paid in the quarter of purchase,and 50 percent are paid in the following quarter.All other expenses,including taxes,are paid in the quarter incurred.
9. Selling,general,and administrative expense includes $2,000 of depreciation related to furniture and ?xtures with a book value (net of accumulated depreciation) of $50,000 at the end of 2011.
10. The tax rate is expected to remain at 40 percent.
11. The cash balance at the end of 2011 is $30,000.
12. Common stock at the end of 2011 is $80,000 and retained earnings is $137,500.
13. Asset accounts are cash,accounts receivable,inventory,and furniture and ?xtures.The only liability account is accounts payable.Owner's equity accounts are common stock and retained earnings.

 

Required
a. Prepare a budgeted income statement for the ?rst quarter of 2012.
b. Prepare a cash budget for the ?rst quarter of 2012.
c. Prepare a budgeted balance sheet as of the end of the ?rst quarter of 2012.
d. The company is discussing the possibility of opening a new store late in the ?rst quarter of 2012. A store opening would require cash payments of $50,000.Assuming the company wants a minimum cash balance of $30,000 at the end of the ?rst quarter,can a new store be opened without obtaining additional funds?

 


Related Discussions:- Prepare a budgeted income statement

Elements of the tort of negligence, Answer both parts of this task. Part (i...

Answer both parts of this task. Part (i) is worth a maximum of 5 marks and Part (ii) is worth a maximum of 10 marks. (i) List the elements of the tort of negligence. (ii) Enr

Determine the accounting aspects of business, Determine the accounting aspe...

Determine the accounting aspects of business Accounting scandals can have a profound effect on all those connected with business. Enron scandal, for instance, ultimately led t

Income account-trusts laws and accounts, INCOME ACCOUNT (a) Classific...

INCOME ACCOUNT (a) Classification : Income will be classified under appropriate headings: Rents; Interest on Government securities; Dividends; Interest on

Consolidated statement of comprehensive income, Answer to Question Six ...

Answer to Question Six   Summarised consolidated statement of comprehensive income for the A group for the year ended 30 September 2010 All workings

Explain bonus or capitalisation issues, Q. Explain bonus or capitalisation ...

Q. Explain bonus or capitalisation issues? A rights issue is a approach of raising finance via the issue of shares to existing equity shareholders. Consecutively to make such a

Effect of winding up order-liquidation of companies, Effect of Winding-up O...

Effect of Winding-up Order The consequences of a winding-up order are: 1) Any disposition of the company's property and any transfer of shares is void, unless the court otherwis

Preparation and presentation of financial statements, PREPARATION AND PRESE...

PREPARATION AND PRESENTATION OF FINANCIAL STATEMENTS OF LIMITED COMPANIES This is a chapter dealing with company financial statements, a topic frequently examined. Do not be

Ratio analysis, You have previously been exposed to the 'Introduction and a...

You have previously been exposed to the 'Introduction and analysis' of financial statements in previous sections of this course. From now you might have acquired several familiarit

Ratios, equity share capital rs 10 200 10% preference share capital 80 15%...

equity share capital rs 10 200 10% preference share capital 80 15% debenture 20 profit before interest and taxes 60 proposed dividend 20 provision fo

Salary, the salaries paid in 2004 is rs. 500000 salaries outstanding is rs....

the salaries paid in 2004 is rs. 500000 salaries outstanding is rs.20000 salaries paid in advance for 2004 is rs 30000 what is the actual salary expenditure for 2004?

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd