HANDY HARDWARE, INC. Balance Sheet November 30, 20x1 Assets Cash $ 22,000 Accounts receivable (net of $3,500 allowance for uncollectible accounts) 76,000 Inventory 140,000 Property, plant, and equipment (net of $590,000 accumulated depreciation) 862,000 Total assets $1,100,000 Liabilities and Stockholders' Equity Accounts payable $ 162,000 Common stock 795,000 Retained earnings 143,000 Total liabilities and stockholders' equity $1,100,000

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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Handy Hardware is a retail hardware store. Information about the store’s operations follows.
• November 20x1 sales amounted to $200,000.
• Sales are budgeted at $220,000 for December 20x1 and $200,000 for January 20x2.
• Collections are expected to be 60 percent in the month of sale and 38 percent in the month following the sale. Two percent of sales are expected to be uncollectible. Bad debts expense is recognized monthly.
• The store’s gross margin is 25 percent of its sales revenue.
• A total of 80 percent of the merchandise for resale is purchased in the month prior to the month of sale, and 20 percent is purchased in the month of sale. Payment for merchandise is made in the month following the purchase.
• Other monthly expenses paid in cash amount to $22,600.
• Annual depreciation is $216,000.

The company’s balance sheet as of November 30, 20x1, is as follows:

Required:            Compute the following amounts.
1. The budgeted cash collections for December 20x1.
2. The budgeted income (loss) before income taxes for December 20x1.
3. The projected balance in accounts payable on December 31, 20x1.

HANDY HARDWARE, INC.
Balance Sheet
November 30, 20x1
Assets
Cash
$ 22,000
Accounts receivable (net of $3,500 allowance for uncollectible accounts)
76,000
Inventory
140,000
Property, plant, and equipment (net of $590,000 accumulated depreciation)
862,000
Total assets
$1,100,000
Liabilities and Stockholders' Equity
Accounts payable
$ 162,000
Common stock
795,000
Retained earnings
143,000
Total liabilities and stockholders' equity
$1,100,000
Transcribed Image Text:HANDY HARDWARE, INC. Balance Sheet November 30, 20x1 Assets Cash $ 22,000 Accounts receivable (net of $3,500 allowance for uncollectible accounts) 76,000 Inventory 140,000 Property, plant, and equipment (net of $590,000 accumulated depreciation) 862,000 Total assets $1,100,000 Liabilities and Stockholders' Equity Accounts payable $ 162,000 Common stock 795,000 Retained earnings 143,000 Total liabilities and stockholders' equity $1,100,000
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