Knot on a Log, Inc. is a merchandiser of rustic furniture. All sales are made on account. Cash collections from customers are normally 75% in the first month following the month sale and 24% in the second month following the month of sale. The balance is deemed uncollectible. August sales were $95,000. September sales were $100,000. October sales are expected to be $122,000. Accounts payable consists solely of inventory purchases. All inventory purchases are made on account. Management takes full advantage of the 3% discount allowed on purchases paid by the tenth of the following month. September purchases were $105,000. October purchases are expected to be $95,000. Additional expenses for the month of October are budgeted to be $25,000. Of this amount, $5,000 is for bad debt expense and depreciation expense. In addition, during the month of October, the company expects to declare and pay $3,000 in dividends to its owners.

Knot on a Log, Inc. is a merchandiser of rustic furniture. All sales are made on account. Cash collections from customers are normally 75% in the first month following the month sale and 24% in the second month following the month of sale. The balance is deemed uncollectible. August sales were $95,000. September sales were $100,000. October sales are expected to be $122,000. Accounts payable consists solely of inventory purchases. All inventory purchases are made on account. Management takes full advantage of the 3% discount allowed on purchases paid by the tenth of the following month. September purchases were $105,000. October purchases are expected to be $95,000. Additional expenses for the month of October are budgeted to be $25,000. Of this amount, $5,000 is for bad debt expense and depreciation expense. In addition, during the month of October, the company expects to declare and pay $3,000 in dividends to its owners.

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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