Question

Carver Lumber sells lumber and general building supplies to building contractors in a medium-sized town in Montana. Data regarding the store's operations follow: .Sales are budgeted at $350,000 for November, $320,000 for December, and $300,000 for January. Collections are expected to be 90% in the month of sale and 10% in the month following the sale. The cost of goods sold is 75% of sales The company desires to have an ending merchandise inventory equal to 60% of the following month's cost of goods sold. Payment for merchandise is made in the month following the purchase. Other monthly expenses to be paid in cash are $24,700. Monthly depreciation is $16,000. Ignore taxes Balance Sheet October 31 Assets 19,000 77,000 157,500 Cash Accounts receivable Inventory Property, plant and equipment, net of $502,000 accumulated depreciation 1,002,000 $1,255,500 Total assets Liabilities and Stockholders' Equity $ 272,000 780,000 203,500 Accounts payable Common stock Retained earnings Total liabilities and stockholders' equity $1,255,500 The net income for December would be: Multiple Choice $39,300 $42.300 $32,900 $55,300

Answer 1

Calculate net income

Sales	320000
Cost of goods sold (320000*75%)	-240000
Gross profit	80000
Operating expense (24700+16000)	-40700
Net income	39300

So answer is a) $39300