Rizzo's has been in business since January of the current year. The company buys frozen pizza crusts and resells them to largesupermarket chains in five states. The following Information pertains to Rizzo's first four months of operations:JanuaryFebruaryMarchAprilPurchases$ 40,00032,00044,00024,000Rizzo's expects to open several new sales territories in May. In anticipation of Increased volume, management forecasts May sales at$72,000. To meet this demand, purchases in May are budgeted at $42,000. The company maintains a gross profit margin ofapproximately 40 percent.Sales$ 62,00049,000All of Rizzo's sales are on account. Due to strict credit policies, the company has no bad debt expense. The following collectionperformance is anticipated for the remainder of the year:65,00042,000Percent collected in month of salePercent collected in month following salePercent collected in the second month following saleRequired ARizzo's normally pays for 80 percent of Its purchases in the month that the purchases are made. The remaining amount is paid in thefollowing month. The company's fixed selling and administrative expenses average $12,000 per month. Of this amount, $4,000 isdepreciation expense. Variable selling and administrative expenses are budgeted at 5 percent of sales. The company pays all of itsselling and administrative expenses in the month that they are incurred.Rizzo's debt service is $5,000 per month. Of this amount, approximately $4,500 represents Interest expense, and $500 is payment onthe principal. The company's tax rate is approximately 35 percent. Quarterly tax payments are made at the end of March, June,September, and December.Required:a. Prepare Rizzo's budgeted Income statement for May.b. Prepare Rizzo's cash budget for May. Assume that the company's cash balance on May 1 Is $25,000.c. Why Rizzo's budgeted cash flow In May differs from its budgeted net Income?Complete this question by entering your answers in the tabs below.Required B Required CBudgeted salesCost of goods soldGross profitVariable selling and administrative costsFixed selling and administrative costsPrepare Rizzo's budgeted income statement for May.RIZZO'SBudgeted Income StatementFor the Month of MayBudgeted pretax operating incomeInterest expenseInterest expensePretax incomeincome taxes***** 333 33✔XX$Answer is not complete.SS72,00043,20028,8003,60012,00013,200 X04,5008,700S (13,200)30%6010$ (13,200)33

Budgeted Income Statement for May:AmountSales$72,000Cost of Goods Sold$43,200Gross…

Required: a. Prepare Rizzo's budgeted Income statement for May. b. Prepare Rizzo's cash budget for May. Assume that the company's cash balance on May 1 Is $25,000. c. Why Rizzo's budgeted cash flow in May differs from its budgeted net income? Answer is not complete,

Required: a. Prepare Rizzo's budgeted Income statement for May. b. Prepare Rizzo's cash budget for May. Assume that the company's cash balance on May 1 Is $25,000. c. Why Rizzo's budgeted cash flow in May differs from its budgeted net income? Answer is not complete,

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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