Handy Hardware is a retail hardware store. Information about thestore’s operations follows.
• November 20x1 sales amounted to $200,000. • Sales are budgetedat $220,000 for December 20x1 and $200,000 for January 20x2.
• Collections are expected to be 60 percent in the month of saleand 38 percent in the month follow-ing the sale. Two percent ofsales are expected to be uncollectible. Bad debts expense isrecognized monthly.
• The store’s gross margin is 25 percent of its salesrevenue.
• A total of 80 percent of the merchandise for resale ispurchased in the month prior to the month of sale, and 20 percentis purchased in the month of sale. Payment for merchandise is madein the month following the purchase.
• Other monthly expenses paid in cash amount to $22,600.
• Annual depreciation is $216,000.
The company’s balance sheet as of November 30, 20x1, is asfollows:
HANDY HARDWARE, INC.
Balance Sheet
November 30, 20x1
Assets
Cash..........................................................................................................................................................................$???22,000
Accounts receivable (net of $3,500 allowance for uncollectibleaccounts)..........................................................76,000
Inventory...................................................................................................................................................................140,000
Property, plant, and equipment (net of $590,000 accumulateddepreciation) .....................................................???862,000
Total assets...............................................................................................................................................................$1,100,000
Liabilities and Stockholders’ Equity
Accounts payable.....................................................................................................................................................$???162,000
Common stock.........................................................................................................................................................795,000
Retained earnings....................................................................................................................................................???143,000
Total liabilities and stockholders’ equity.................................................................................................................$1,100,000
Required: Compute the following amounts.
1. The budgeted cash collections for December 20x1.
2. The budgeted income (loss) before income taxes for December20x1.
3. The projected balance in accounts payable on December 31,20x1.
