Actual and forecasted sales for selected months in the upcoming year are as follows: Month (in thousands) Sales Revenue January February March April May June July August $2,600 2,700 3,000 3,600 3,800 3,500 3,200 4,000 Monthly operating expenses are as follows: Wages and salaries $750 Depreciation 75 Advertising Other costs 55 350 Cash dividends for the store of $710 thousand are declared during the third month of each quarter and are paid during the first month of the following quarter. Operating expenses, except insurance, rent, and depreciation are paid as incurred. The prepaid insurance is for five more months. Cost of goods sold is equal to 60% of sales. Ending inventories are sufficient for 150% of the next month's cost of sales. Purchases during any given month are paid in full during the following month. Cash sales account for 50% of the revenue. Of the credit sales, 60% are collected in the next month and 40% are collected in the month after. Money can be borrowed and repaid in multiples of $100 thousand at an interest rate of 12% per year. The company desires a minimum cash balance of $2 million on the first of each month. At the time the principal is repaid, interest is paid on the portion of principal that is repaid. All borrowing is at the beginning of the month, and all repayment is at the end of the month. Money is never repaid at the end of the month it is borrowed. (e) Prepare an income statement for each month of the second quarter ending June 30. Only use negative signs to show net losses for income.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Assume Nordstrom prepares budgets quarterly. The following information is available for use in planning the second quarter budgets for one of its stores (in thousands).
Cash
NORDSTROM
Balance Sheet
March 31
Liabilities and Stockholders' Equity
$ 2,525 Merchandise purchases payable
$2,400
710
Dividends payable
Stockholders' equity 8,005
Assets
Accounts receivable
Inventory
2,040
3,400
Prepaid Insurance
150
Fixtures
3,000
Total assets
$11,115
Total liabilities and equity $11,115
Actual and forecasted sales for selected months in the upcoming year are as follows:
Month (in thousands) Sales Revenue
January
February
March
April
May
June
July
August
$2,600
2,700
3,000
3,600
3,800
3,500
3,200
4,000
Monthly operating expenses are as follows:
Wages and salaries $750
Depreciation
75
Advertising
Other costs
55
350
Cash dividends for the store of $710 thousand are declared during the third month of each quarter and are paid during the
first month of the following quarter. Operating expenses, except insurance, rent, and depreciation are paid as incurred. The
prepaid insurance is for five more months. Cost of goods sold is equal to 60% of sales. Ending inventories are sufficient for
150% of the next month's cost of sales. Purchases during any given month are paid in full during the following month. Cash
sales account for 50% of the revenue. Of the credit sales, 60% are collected in the next month and 40% are collected in the
month after. Money can be borrowed and repaid in multiples of $100 thousand at an interest rate of 12% per year. The
company desires a minimum cash balance of $2 million on the first of each month. At the time the principal is repaid, interest
is paid on the portion of principal that is repaid. All borrowing is at the beginning of the month, and all repayment is at the
end of the month. Money is never repaid at the end of the month it is borrowed.
(e) Prepare an income statement for each month of the second quarter ending June 30.
Only use negative signs to show net losses for income.
NORDSTROMS
Budgeted Monthly Income Statements (in thousands)
Quarter Ending June 30
April
May
June
Total
Sales
$ 3,600 $ 3,800 $
3,500 $
10,900
Cost of sales
2,160
2,280
2,100
6,540
Gross profit
1,440
1,520
1,400
4,360
Operating expenses:
Wages and salaries
750
750
Depreciation
75
Advertising
55
Other costs
350
Insurance
30
> > > >
75
55
350
> > >
750
2,250
75
225
55
165
30
、、
350
1,050
30
90
Interest
0x
4 x
9 ×
13
Total expenses
1,260 x
1,264 x
$
Pre-tax income
180 x
$
256 x $
1,269 x
131 x $
3,793
567
Transcribed Image Text:Assume Nordstrom prepares budgets quarterly. The following information is available for use in planning the second quarter budgets for one of its stores (in thousands). Cash NORDSTROM Balance Sheet March 31 Liabilities and Stockholders' Equity $ 2,525 Merchandise purchases payable $2,400 710 Dividends payable Stockholders' equity 8,005 Assets Accounts receivable Inventory 2,040 3,400 Prepaid Insurance 150 Fixtures 3,000 Total assets $11,115 Total liabilities and equity $11,115 Actual and forecasted sales for selected months in the upcoming year are as follows: Month (in thousands) Sales Revenue January February March April May June July August $2,600 2,700 3,000 3,600 3,800 3,500 3,200 4,000 Monthly operating expenses are as follows: Wages and salaries $750 Depreciation 75 Advertising Other costs 55 350 Cash dividends for the store of $710 thousand are declared during the third month of each quarter and are paid during the first month of the following quarter. Operating expenses, except insurance, rent, and depreciation are paid as incurred. The prepaid insurance is for five more months. Cost of goods sold is equal to 60% of sales. Ending inventories are sufficient for 150% of the next month's cost of sales. Purchases during any given month are paid in full during the following month. Cash sales account for 50% of the revenue. Of the credit sales, 60% are collected in the next month and 40% are collected in the month after. Money can be borrowed and repaid in multiples of $100 thousand at an interest rate of 12% per year. The company desires a minimum cash balance of $2 million on the first of each month. At the time the principal is repaid, interest is paid on the portion of principal that is repaid. All borrowing is at the beginning of the month, and all repayment is at the end of the month. Money is never repaid at the end of the month it is borrowed. (e) Prepare an income statement for each month of the second quarter ending June 30. Only use negative signs to show net losses for income. NORDSTROMS Budgeted Monthly Income Statements (in thousands) Quarter Ending June 30 April May June Total Sales $ 3,600 $ 3,800 $ 3,500 $ 10,900 Cost of sales 2,160 2,280 2,100 6,540 Gross profit 1,440 1,520 1,400 4,360 Operating expenses: Wages and salaries 750 750 Depreciation 75 Advertising 55 Other costs 350 Insurance 30 > > > > 75 55 350 > > > 750 2,250 75 225 55 165 30 、、 350 1,050 30 90 Interest 0x 4 x 9 × 13 Total expenses 1,260 x 1,264 x $ Pre-tax income 180 x $ 256 x $ 1,269 x 131 x $ 3,793 567
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