Question

Question 3 (5 points) The Banderas Company, a merchandising firm, has budgeted its activity for December according to the following information: 1) Sales at $550,000, all for cash. 2) Merchandise inventory on November 30 was $300,000 3) Budgeted depreciation for December is $35,000. 4) The cash balance at December 1 was $25,000. 5) Selling and administrative expenses are budgeted at $60,000 for December and are paid in cash. 6) The planned merchandise inventory on December 31 is $270,000. 7) The invoice cost for merchandise purchases represents 75% of the sales price. All purchases are paid for in cash. Budgeted Net incomes for December is: Oo 477,500 442,500 382,500 472,500 Od

Answer 1

Solution

Banderas Company

Computation of net income for December –

Sales          $550,000

Less: cost of goods sold $442.500

Gross margin $107,500

Less: budgeted depreciation $35,000

Less: selling expenses $60,000

Net income = $12,500

Computation of cost of goods sold –

Purchases = 75% x 550,000 = 412,500

Add: beg. Inventory $300,000

Sub-total $712,500

Less: ending inventory 270,000

Cost of goods sold $442,500