Sullivan Corner Shoppe is a local convenience store with the following information: October sales were $260,000. •Sales are projected to go up by 8% in November (from the October sales) and another 25% in December (from the November sales) and then return to the October level in January. •25% of sales are made in cash, while the remaining 75% are paid by credit or debit cards. The credit card companies and banks (debit card issuers) charge a 4% transaction fee, and deposit the net amount (sales price less the transaction fee) in the store's bank account daily. • Sullivan Corner Shoppe's gross profit is 30% of its sales revenue. • For the next several months, the store wants to maintain an ending merchandise inventory equal to $16,000 + 20% of the next month's cost of goods sold. The September 30 inventory was $52,400. •Expected monthly operating expenses include: •Wages of store workers are $8,500 per month •Utilities expense of $1,800 in November and $1,700 in December •Property tax expense of $1,900 per month • Property and liability insurance expense of $200 per month •Depreciation expense of $4,500 per month •Transaction fees, as stated above, are 4% of credit and debit card sales Prepare the following budgets for November and December: 1. Sales budget 2. Cost of goods sold, inventory, and purchases budget 3. Operating expense budget 4. Budgeted income statement

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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Sullivan Corner Shoppe is a local convenience store with the following information:

October sales were $260,000.

•Sales are projected to go up by 8% in November (from the October sales) and another 25% in December (from the November sales) and then return to the October level in January.

•25% of sales are made in cash, while the remaining 75% are paid by credit or debit cards. The credit card companies and banks (debit card issuers) charge a 4% transaction fee, and deposit the net amount (sales price less the transaction fee) in the store's bank account daily.

• Sullivan Corner Shoppe's gross profit is 30% of its sales revenue.

• For the next several months, the store wants to maintain an ending merchandise inventory equal to

$16,000 + 20% of the next month's cost of goods sold. The September 30 inventory was $52,400.

•Expected monthly operating expenses include:

•Wages of store workers are $8,500 per month

•Utilities expense of $1,800 in November and $1,700 in December

•Property tax expense of $1,900 per month

• Property and liability insurance expense of $200 per month

•Depreciation expense of $4,500 per month

•Transaction fees, as stated above, are 4% of credit and debit card sales

Prepare the following budgets for November and December:
1.	Sales budget
2.	Cost of goods sold, inventory, and purchases budget
3.	Operating expense budget
4.	Budgeted income statement

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