Budgeting for a Merchandising Firm Goldberg Company is a retail sporting goods store thatuses an accrual accounting system. Facts regarding its operations follow:∙ Sales are budgeted at $250,000 for December and $225,000 for January, terms 1/eom, n/60.∙ Collections are expected to be 50% in the month of sale and 48% in the month following the sale.Two percent of sales are expected to be uncollectible and recorded in an allowance account at theend of the month of sale. Bad debts expense is included as part of operating expenses.∙ Gross margin is 30% of gross sales.∙ All accounts receivable are from credit sales. Bad debts are written off against the allowanceaccount at the end of the month following the month of sale.∙ Goldberg desires to have 80% of the merchandise for the following month’s sales on hand at the endof each month. Payment for merchandise is made in the month following the month of purchase.∙ Other monthly operating expenses to be paid in cash total $25,000.∙ Annual depreciation is $216,000, one-twelfth of which is reflected as part of monthly operatingexpenses.Goldberg Company’s statement of financial position at the close of business on November 30follows:GOLDBERG COMPANYStatement of Financial PositionNovember 30, 2019AssetsCash $ 30,000Accounts receivable (net of $4,000allowance for doubtful accounts) 76,000Inventory 132,000Property, plant, and equipment (net of$680,000 accumulated depreciation) 870,000Total assets $1,108,000Liabilities and Stockholders’ EquityAccounts payable $ 162,000Common stock 800,000Retained earnings 146,000Total liabilities and equity $1,108,000Required3. How much is the income (loss) before income taxes for December?
Budgeting for a Merchandising Firm Goldberg Company is a retail sporting goods store that
uses an accrual accounting system. Facts regarding its operations follow:
∙ Sales are budgeted at $250,000 for December and $225,000 for January, terms 1/eom, n/60.
∙ Collections are expected to be 50% in the month of sale and 48% in the month following the sale.
Two percent of sales are expected to be uncollectible and recorded in an allowance account at the
end of the month of sale.
∙ Gross margin is 30% of gross sales.
∙ All accounts receivable are from credit sales. Bad debts are written off against the allowance
account at the end of the month following the month of sale.
∙ Goldberg desires to have 80% of the merchandise for the following month’s sales on hand at the end
of each month. Payment for merchandise is made in the month following the month of purchase.
∙ Other monthly operating expenses to be paid in cash total $25,000.
∙ Annual
expenses.
Goldberg Company’s
follows:
GOLDBERG COMPANY
Statement of Financial Position
November 30, 2019
Assets
Cash $ 30,000
Accounts receivable (net of $4,000
allowance for doubtful accounts) 76,000
Inventory 132,000
Property, plant, and equipment (net of
$680,000 accumulated depreciation) 870,000
Total assets $1,108,000
Liabilities and Stockholders’ Equity
Accounts payable $ 162,000
Common stock 800,000
Retained earnings 146,000
Total liabilities and equity $1,108,000
Required
3. How much is the income (loss) before income taxes for December?
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