Carver Lumber sells lumber and general building supplies to building contractors in a medium-sized town...
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Accounting
Carver Lumber sells lumber and general building supplies to building contractors in a medium-sized town in Montana. Data regarding the store's operations follow:
Sales are budgeted at $355,000 for November, $325,000 for December, and $305,000 for January.
Collections are expected to be 80% in the month of sale and 20% in the month following the sale.
The cost of goods sold is 80% of sales.
The company desires to have an ending merchandise inventory equal to 50% of the following month's cost of goods sold. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $25,200.
Monthly depreciation is $17,000.
Ignore taxes.
Balance Sheet October 31
Assets
Cash
$
20,500
Accounts receivable
78,000
Inventory
142,000
Property, plant and equipment, net of $504,500 accumulated depreciation
1,007,000
Total assets
$
1,247,500
Liabilities and Stockholders Equity
Accounts payable
$
274,500
Common stock
785,000
Retained earnings
188,000
Total liabilities and stockholders equity
$
1,247,500
The net income for December would be:
Multiple Choice
$22,800
$39,800
$18,000
$26,300
Answer & Explanation
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