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
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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.
• 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
The company’s
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.
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