Question

Copland Supplies Company is a retail store that purchases merchandizes from several makers of office equipment. Actual balance sheet is presented below: Balance Sheet As of September 30, 2018 Cash $25,000 Accounts Receivable (Net of allowance for uncollectible accounts) $70,000 $79,625 $1,225,375 Inventory Property Plant Equipment (Net of $640,000 accumulated depreciation) Total Assets Accounts Payable Common Stock Retained Earnings Total Liabilities and Stockholders' Equity $1,400.000 $170,000 $1,050,000 $180.000 $1,400.000 To prepare budgets, the budget officer gathered addition budget data: Sales are budgeted at $350,000, $260,000, and $230,000, all on credit, for October, November, and December, respectively • The company will declare $15,000 dividend in October, which will be paid in November . Collections are expected to be 55% in the month of sale, 40% in the month following the sale, and 5% uncollectible. Copland Supplies recognizes bad debt expenses in the month sales are made. • The cost of goods sold is 65% of sales. • The ending merchandise inventory should be 35% of the following month sales needs • Payment for merchandise purchases is expected to be 60% in the month of purchase with the remaining paid in the following month • Monthly selling and administrative expenses to be paid in cash are $32,000 Monthly depreciation is $20,000. 17 Copland Supplies' retained earnings balance at the end of November would be (Assume the company pays no interest and income tax when answering this question) A $64,000 B. $259,000 C. $218,000 D. $244,000 E. None of the above

Answer 1

X for October А в DE sales cost of goods sold bad debt expense selling and administrative expenses depreciation net income october $ 350,000 $ 227,500 $ 17,500 $ 32,000 $ 20,000 $ 53,000 november $ 260,000 $ 169,000 $ 13,000 $ 32,000 $ 20,000 $ 26,000 | statement of retained earnings retained earnings balance, september 30 october net income dividends declared in october november net income retained earnings balance, november 30 | $ 180,000 $ 53,000 $ 15,000 $ 26,000 $ 244,000 hence, the correct answer is D. $244,000

for formulas and calculations, refer to the image below -

D2 x fc october A B DE E sales cost of goods sold bad debt expense selling and administrative expenses depreciation = net income october 350000 =D3*65% =D3*5% 32000 20000 =D3-D4-D5-D6-D7 november 260000 =E3*65% =E3*5% 32000 20000 =E3-E4-E5-E6-E7 statement of retained earnings retained earnings balance, september 30 (180000 october net income =D8 dividends declared in october 15000 + november net income =E8 | = | retained earnings balance, november 30 =D11+D12-D13+D14 | hence, the correct answer is D. $244,000