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

Financial statements, are the notes to the financial statements part of the...

are the notes to the financial statements part of the financial reporting

Determine the overvalue or undervalue of share, The New York Jets have deci...

The New York Jets have decided to go public and are offering new shares for $40. Since the Jets want to build a new stadium, the firm will retain all earnings and will not issue an

Future rates of return, Assume your grandparents have just given you $20,00...

Assume your grandparents have just given you $20,000 on the condition that you invest the money in the stock market. As you contemplate making your investment choices, what account

Determine income statement , Mr. Wong currently running a small manufactur...

Mr. Wong currently running a small manufacturing business.  The Trial Balance of the business at 31 March 2011 is as follows:

Tracing trust property-breach of law-trusts laws , Tracing trust property ...

Tracing trust property   Apart from suing the trustee, in the event of a breach of trust, the beneficiary may follow the trust property and recover it from third parties, or the p

Debit and credit ., How can we differentiate debit and credit

How can we differentiate debit and credit

Explain statement of financial condition, Q. Explain Statement of Financial...

Q. Explain Statement of Financial Condition? Statement of Financial Condition -Elementary FINANCIAL STATEMENT, generally accompanied by appropriate DISCLOSURES which describe t

Partnership accounting, How does ordinary shares and preference shares incl...

How does ordinary shares and preference shares included in the account

Internal audit department and financial statements, 1.  What cost flow assu...

1.  What cost flow assumption does the company use to value inventories? 2.  What was the amount of expense that the company reported for inventory write-downs during 2011? 3

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