Inc. is a retailer. Its accountants are preparing the company's 2nd quarter master budget. The company has the following balance sheet as of March 31. Inc. Balance Sheet March 31 Assets Cash $ 83,000 Accounts receivable Inventory 126,000 69,750 220,000 Plant and equipment, net of depreciation Total assets $ 498,750 Liabilities and Stockholders' Equity Accounts payable Common stock $ 81,000 348,000 69,750 Retained earnings Total liabilities and stockholders' equity $ 498,750 accountants have made the following estimates: Sales for April, May, June, and July will be $310,000, $330,000, $320,000, and $340,000, respectively. All sales are on credit. Each month's credit sales are collected 35% in the month of sale and 65% in the month following the sale. All of the accounts receivable at March 31 will be collected in April. Each month's ending inventory must equal 30% of next month's cost of goods sold. The cost of goods sold is 75% of sales. The company pays for 40% of its merchandise purchases in the month of the purchase and the remaining 60% in the month following the purchase. All of the accounts payable at March 31 are related to previous merchandise purchases and will be paid in April. Monthly selling and administrative expenses are always $58,000. Each month $6,000 of this total amount is depreciation expense and the remaining $52,000 is spent for expenses that are paid in the month they are incurred. The company will not borrow money or pay or declare dividends during the 2nd quarter. The company will not issue any
Inc. is a retailer. Its accountants are preparing the company's 2nd quarter master budget. The company has the following balance sheet as of March 31. Inc. Balance Sheet March 31 Assets Cash $ 83,000 Accounts receivable Inventory 126,000 69,750 220,000 Plant and equipment, net of depreciation Total assets $ 498,750 Liabilities and Stockholders' Equity Accounts payable Common stock $ 81,000 348,000 69,750 Retained earnings Total liabilities and stockholders' equity $ 498,750 accountants have made the following estimates: Sales for April, May, June, and July will be $310,000, $330,000, $320,000, and $340,000, respectively. All sales are on credit. Each month's credit sales are collected 35% in the month of sale and 65% in the month following the sale. All of the accounts receivable at March 31 will be collected in April. Each month's ending inventory must equal 30% of next month's cost of goods sold. The cost of goods sold is 75% of sales. The company pays for 40% of its merchandise purchases in the month of the purchase and the remaining 60% in the month following the purchase. All of the accounts payable at March 31 are related to previous merchandise purchases and will be paid in April. Monthly selling and administrative expenses are always $58,000. Each month $6,000 of this total amount is depreciation expense and the remaining $52,000 is spent for expenses that are paid in the month they are incurred. The company will not borrow money or pay or declare dividends during the 2nd quarter. The company will not issue any
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
Question
Transcribed Image Text:Inc. is a retailer. Its accountants are preparing the company's 2nd quarter master budget. The company has
the following balance sheet as of March 31.
Inc.
Balance Sheet
March 31
Assets
Cash
$ 83,000
Accounts receivable
Inventory
126,000
69,750
220,000
Plant and equipment, net of depreciation
Total assets
$ 498,750
Liabilities and Stockholders' Equity
Accounts payable
Common stock
$ 81,000
348,000
69,750
Retained earnings
Total liabilities and stockholders' equity
$ 498,750
accountants have made the following estimates:
1. Sales for April, May, June, and July will be $310,000, $330,000, $320,000, and $340,000, respectively.
2. All sales are on credit. Each month's credit sales are collected 35% in the month of sale and 65% in the month following the
sale. All of the accounts receivable at March 31 will be collected in April.
3. Each month's ending inventory must equal 30% of next month's cost of goods sold. The cost of goods sold is 75% of sales.
The company pays for 40% of its merchandise purchases in the month of the purchase and the remaining 60% in the month
following the purchase. All of the accounts payable at March 31 are related to previous merchandise purchases and will be
paid in April.
4. Monthly selling and administrative expenses are always $58,000. Each month $6,000 of this total amount is depreciation
expense and the remaining $52,000 is spent for expenses that are paid in the month they are incurred.
5. The company will not borrow money or pay or declare dividends during the 2nd quarter. The company will not issue any
common stock or repurchase its own stock during the 2nd quarter.
Transcribed Image Text:How much is the company's expected total Net Operating Income for the 2nd quarter ending on June 30?
Multiple Choice
$960,000
$66,000
$240,000
$786,000
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