Question

Goldberg Company is a retail sporting goods store that uses an accrual accounting system. Facts regarding its operations follRequired: 1. What is the total of budgeted cash collections for December? 2. How much is the book value of accounts receivabl

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Answer #1

Answer to Requirement 1:
Budgeted Cash Collections for December = Accounts Receivable, Net + (December Sales * 50%)
Budgeted Cash Collections for December = $48,000 + ($190,000 * 50%)
Budgeted Cash Collections for December = $48,000 + $95,000
Budgeted Cash Collections for December = $143,000

Answer to Requirement 2:
Book Value of Accounts Receivable, December 31 = (December Sales * 50%) - (December Sales * 2%)
Book Value of Accounts Receivable, December 31 = ($190,000 * 50%) – ($190,000 * 2%)
Book Value of Accounts Receivable, December 31 = $95,000 - $3,800
Book Value of Accounts Receivable, December 31 = $91,200

Answer to Requirement 3:
Income / (Loss) before Income Taxes = Gross Margin – Operating Expenses including Depreciation
Gross Margin = $190,000 * 30%
Gross Margin = $57,000

Depreciation per month = $144,000 / 12
Depreciation per month = $12,000

Income / (Loss) before Income Taxes = $57,000 - $15,200 - $12,000
Income before Income Taxes = $29,800

Answer to Requirement 4:
Projected Balance in Inventory, December 31 = January Sales * Costs * 80%
Projected Balance in Inventory, December 31 = $160,000 * 70% * 80%
Projected Balance in Inventory, December 31 = $89,600

Answer to Requirement 5:
Budgeted Purchases for December = December Sales + Desired Ending Inventory – Beginning Inventory
Budgeted Purchases for December = $190,000 + $89,600 - $106,400
Budgeted Purchases for December = $173,200

Answer to Requirement 6:
Projected balance in Accounts Payable, December 31 = Budgeted Purchases for December
Projected balance in Accounts Payable, December 31 = $173,200

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