Question

Goldberg Company is a retail sporting goods store that uses an accrual accounting system. Facts regarding...

Goldberg Company is a retail sporting goods store that uses an accrual accounting system. Facts regarding its operations follow:

  • Sales are budgeted at $200,000 for December and $170,000 for January, terms 1/eom, n/60.
  • Collections are expected to be 50% in the month of sale and 48% in the month following the sale. Two percent of sales are expected to be uncollectible and recorded in an allowance account at the end of the month of sale. Bad debts expense is included as part of operating expenses.
  • Gross margin is 30% of gross sales.
  • All accounts receivable are from credit sales. Bad debts are written off against the allowance account at the end of the month following the month of sale.
  • Goldberg desires to have 80% of the merchandise for the following month’s sales on hand at the end of each month. Payment for merchandise is made in the month following the month of purchase.
  • Other monthly operating expenses to be paid in cash total $16,000.
  • Annual depreciation is $150,000, one-twelfth of which is reflected as part of monthly operating expenses.

Goldberg Company’s statement of financial position at the close of business on November 30 follows:

GOLDBERG COMPANY
Statement of Financial Position
November 30, 2019
Assets
Cash $ 15,000
Accounts receivable
(net of $4,000 allowance for doubtful accounts)
50,000
Inventory 112,000
Property, plant, and equipment
(net of $550,000 accumulated depreciation)
930,000
Total assets $ 1,107,000
Liabilities and Stockholders’ Equity
Accounts payable $ 135,000
Common stock 800,000
Retained earnings 172,000
Total liabilities and equity $ 1,107,000

Required:

1. What is the total of budgeted cash collections for December?

2. How much is the book value of accounts receivable at the end of December?

3. How much is the income (loss) before income taxes for December?

4. What is the projected balance in inventory on December 31, 2019?

5. What are budgeted purchases for December?

6. What is the projected balance in accounts payable on December 31, 2019?

(For all requirements, Do not round intermediate calculations.)

1. Budgeted cash collections for December **   
2. Net accounts Receivable - December 31st **
3 * **
4 Budgeted inventory, December 31st **
5 Budgeted purchases during December **
6 Budgeted accounts payable, December 31st **

*: Pre-tax operating income - December or Pre-tax operating loss - December

**: please answer

0 0
Add a comment Improve this question Transcribed image text
Answer #1

Requirement 1: Compute budgeted cash collections in December as follows

Particulars Amount
Budgeted cash collections in December:
Accounts receivables of November $50,000
December sales ($200,000 × 50% × 99%) $99,000
Total budgeted cash collections in December $149,000

  Requirement 2: Compute ending balance of accounts receivable in December as follows

Particulars Amount
Net accounts receivable in December:
Budged sales revenue $200,000
Deduct: Allowance for doubtful accounts ($200,000 × 2%) $4,000
Net accounts receivable from sales of December $196,000
Accounts receivables collected in December ($200,000 × 50%) $100,000
               Total net accounts receivable ending balance in December $96,000

  Requirement 3: Compute net income before taxes for December as follows

Particulars Amount Amount
Budgeted pre-tax operating income in December:
Sales revenue $200,000
Cost of goods sold ($200,000 × (1 − 30%)) $140,000
Gross margin $60,000
Operating expenses
            Other operating expenses $16,000
            Bad debt expense ($200,000 × 2%) $4,000
            Depreciation expense ($150,000 ÷ 12) $12,500
                     Total operating expenses $32,500
Pre-tax operating income $27,500

  Requirement 4: Compute budgeted balance of ending inventory in December as follows

Particulars Amount
Budgeted ending inventory in December:
    Inventory ($170,000 × 70% × 80%) $95,200

  Requirement 5: Compute budgeted purchases during December as follows

Particulars Amount
Budgeted purchases in December:
Cost of goods sold ($200,000 × (1 − 30%)) $140,000
Add: Ending inventory $95,200
Total inventory required $235,200
Deduct: Beginning inventory $112,000
Purchases during December $123,200

  Requirement 6: Compute ending balance of budgeted accounts payable in December as follows

Particulars Amount
Budgeted accounts payable in December:
Beginning balance of accounts payable $135,000
Add: Purchases during December $123,200
Total accounts payable $258,200
Deduct: Payments made during December $135,000
Ending balance of accounts Payable $123,200
Add a comment
Know the answer?
Add Answer to:
Goldberg Company is a retail sporting goods store that uses an accrual accounting system. Facts regarding...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT