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

Illustration of retirement of a partner, Illustration of Retirement of a pa...

Illustration of Retirement of a partner A, B and C have been trading as equal partners having capital contributions of £500,000 and £400,000 and £300,000 respectively as at 1st

Designs income statement, Please use the information below to complete Form...

Please use the information below to complete Form 1120S and the Schedule K-1%u2019s for Form 1120S. Blank forms can be found on the Hands-On Assignment page or in Doc Sharing. If y

Absorption costing, Absorption costing is a cost accounting method that ...

Absorption costing is a cost accounting method that tries to charge all direct costs and all production costs of an organization to specific units of pr

Bond Valuation, FV of Bond 20000, CR 0.045, MR 0.059, Remaining payments 32...

FV of Bond 20000, CR 0.045, MR 0.059, Remaining payments 32. Answer

Retained earnings for plant expansion, Foley Corporation has the following ...

Foley Corporation has the following capital structure at the beginning of the year: 6% Preferred stock, $50 par value, 20,000 shares authorized, 6,000 shares issued and outstanding

Revenue recognition, Revenue recognition is a joint project of financial ac...

Revenue recognition is a joint project of financial accounting standard board and international accounting standard board.1.identify the roles and objectives of FASB and IASB?.2. W

Report on the management of foreign trade risks, Q. Report on the managemen...

Q. Report on the management of foreign trade risks? Your company is probable to face three types of risk in connection with its foreign trade. These are as: (1) Foreign exch

Assets-balance sheet-trusts laws and accounts, Assets   1) The classificat...

Assets   1) The classification of investments in the Balance Sheet will be under a few broad headings with schedules listing the individual assets. Where the Trustees Act has been

Ed Mettway, Should Touring Enterprises consider liabilities as a part of it...

Should Touring Enterprises consider liabilities as a part of its permanent financing? Why or why not?n #Minimum 100 words accepted#

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