Question

Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: Sales are budgeted at $290,000 for November, $310,000 for December, and $210,000 for January.

Collections are expected to be 65% in the month of sale and 35% in the month following the sale.

The cost of goods sold is 80% of sales. The company desires to have an ending merchandise inventory at the end of each month equal to 70% of the next 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 $21,100. Monthly depreciation is $21,000. Ignore taxes. Balance Sheet October 31 Assets Cash $ 25,000 Accounts receivable 77,000 Merchandise inventory 162,400 Property, plant and equipment, net of $624,000 accumulated depreciation 1,026,000 Total assets $ 1,290,400 Liabilities and Stockholders' Equity Accounts payable $ 239,000 Common stock 740,000 Retained earnings 311,400 Total liabilities and stockholders' equity $ 1,290,400

Q: The net income for December would be?

Answer 1

Calculate net income for December

Sales	310000
Cost of goods sold (310000*80%)	-248000
Gross profit	62000
Other expense (21000+21100)	-42100
Net income	19900