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Q10. Carver Lumber sells lumber and general building supplies to building contractors in a medium-sized...

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Accounting

Q10. 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 $370,000 for November, $340,000 for December, and $320,000 for January.
  • Collections are expected to be 90% in the month of sale and 10% 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 $26,700.
  • Monthly depreciation is $20,000.
  • Ignore taxes.

Balance Sheet October 31
Assets
Cash $ 25,000
Accounts receivable 81,000
Inventory 148,000
Property, plant and equipment, net of $512,000 accumulated depreciation 1,022,000
Total assets $ 1,276,000
Liabilities and Stockholders Equity
Accounts payable $ 282,000
Common stock 800,000
Retained earnings 194,000
Total liabilities and stockholders equity $ 1,276,000

The net income for December would be:

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