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Question: hi my question is regarding budgeted financial statements retailer everywhere...

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Hi my question is regarding budgeted financial statements: retailer

Everywhere store is a retail store supplying sporting equipment to community sports clubs. 

Here some info about the store's operations. 

  • November sales are $400,000
  • Sales are budgeted $440,000 for December and $400,000 for Jan
  • Receipts are expected to be 60% in the month of sale and 38% in the month following the sale. Two percent of sales are expected to be uncollectable.
  • The store's gross margin is 25% of its sales revenue.
  • A total of 80% of the merchandise for resale is purchased in the month prior to the month of sale and 20% 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 $45,200
  • Annual depreciation is $432,000

The balance sheet of Everywhere Sports as at 30 Nov is:

Assets:  
Cash $44 000
Accounts receivable (net of $7,000 allowance for uncollectable accounts) 152 000
Inventory 280 000
Property, plant and equipment (net of $1,180,000 accumulated depreciation) 1 724 000
Total assets $2 200 000
Liabilities and shareholders' equity:  
Accounts payable 324 000
Ordinary shares 1 590 000
Retained earnings 286 000

Total liabilities and shareholders' equity: $2 200 000

Required:

Calculate the following amounts:

1. Budgeted cash receipts for December

2. Budgeted profit(loss) before income taxes for December

3. Projected balance in accounts payable on 31 December.

I have done this but I am stuck... I am getting mixed up with the months of December and January and how much I am to deduct. Also, what do I do with the depreciation? I need help please! :)

Thank you very much!

Nadia

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