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. 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 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 depreciation is $216,000, one-twelfth of which is reflected as part of monthly operating expenses. Goldberg Company’s statement of financial position at the close of business on November 30 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: 4. What is the projected balance in inventory on December 31, 2019? 5. What are budgeted inventory purchases for December? 6. What is the projected balance in accounts payable on December 31, 2019?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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. 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 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 depreciation is $216,000, one-twelfth of which is reflected as part of monthly operating expenses.

Goldberg Company’s statement of financial position at the close of business on November 30 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:

4. What is the projected balance in inventory on December 31, 2019?

5. What are budgeted inventory purchases for December?

6. What is the projected balance in accounts payable on December 31, 2019?

(For all requirements, Do not round intermediate calculations.)

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