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

Investment with cum.div. quotation-executorship laws, Investment with cum.d...

Investment with cum.div. Quotation Investment with cum.div. Quotation will be debited to the investment account at its full value. When the dividend is subsequently received it

Define accounting, Question 1 Define Accounting. Briefly explain the ‘Enti...

Question 1 Define Accounting. Briefly explain the ‘Entity Concept' and ‘Money Measurement Concept' of accounting Question 2 What is rectification of errors? List and explain the

Calculate the operating cash flow, You are evaluating a project which costs...

You are evaluating a project which costs $720,000, has a four-year life, and no salvage value. Depreciation is straight-line and the half year rule does not apply. Sales are projec

Corporate financial accounting, Independent research of the key topics avai...

Independent research of the key topics available on the website of professional accounting bodies

Operating leases, Staples INC has operating leases. Assuming a discount rat...

Staples INC has operating leases. Assuming a discount rate of 9%, adjust the current balance sheet for the presences of these leases. Which reported expenses would change if these

What is jobs deduction, Don and Harvey began operations as a partnership on...

Don and Harvey began operations as a partnership on October 3, 2010. The company spent $60,500 on organization costs that year. How much can the company deduct in 2010 relating to

What is its wacc, You were hired as a consultant to Giambono Company, whose...

You were hired as a consultant to Giambono Company, whose target capital structure is 40% debt, 15% preferred, and 45% common equity. The after-tax cost of debt is 6.00%, the cost

Vat, recommendation regarding the current south African vat system

recommendation regarding the current south African vat system

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