Problem 10-49: Budgeting for a Merchandising Firm Background                       Budgeted sales:                  December   $250,000              January   $225,000         Collections of A/R:                Collected in month of sale 50.00%              Collected following month 48.00%              Est B/D expense 2.00%              Discount for early payment 1.00%         Gross margin %   30%         Target End Inv, as % of following month's sales  80.00%         Merchandise payments:                % paid in month following month of purchase 100.00%         Other operating expenses (cash) = $25,000         Annual depreciation expense = $216,000                                       Goldberg Company's statement of financial position at the close of business on November 30th follows:                    GOLDBERG COMPANY     Statement of Financial Position     November 30, 2016                   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                               Requirements                                                   4. What is the projected balance in inventory on December 31, 2016?         5. What are budgeted purchases for December?           6. What is the projected balance in accounts payable on December 31, 2016?

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Problem 10-49: Budgeting for a Merchandising Firm
Background        
             
Budgeted sales:            
     December   $250,000        
     January   $225,000        
Collections of A/R:          
     Collected in month of sale 50.00%        
     Collected following month 48.00%        
     Est B/D expense 2.00%        
     Discount for early payment 1.00%        
Gross margin %   30%        
Target End Inv, as % of following month's sales  80.00%        
Merchandise payments:          
     % paid in month following month of purchase 100.00%        
Other operating expenses (cash) = $25,000        
Annual depreciation expense = $216,000        
             
             
  Goldberg Company's statement of financial position at the close of business on November 30th follows:   
             
  GOLDBERG COMPANY  
  Statement of Financial Position  
  November 30, 2016  
             
  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  
             
             
Requirements      
             
         
         
         
4. What is the projected balance in inventory on December 31, 2016?        
5. What are budgeted purchases for December?          
6. What is the projected balance in accounts payable on December 31, 2016?        
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Introduction

Budget includes estimated sales, purchases, production, expenditure, and cash flow position. Budget facilitates decision making such as; inventory levels to be maintained, cash to be maintained, or capital expenditure to be incurred in the budgeted period.

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