Question 24 Carver Lumber sells lumber and general building supplies to building contractors in a...
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Accounting
Question 24
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 $350,000 for November, $320,000 for December, and $300,000 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 75% of sales.
The company desires to have an ending merchandise inventory equal to 60% 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 $24,700.
Monthly depreciation is $16,000.
Ignore taxes.
Balance Sheet
October 31
Assets
Cash
$ 19,000
Accounts receivable
77,000
Inventory
157,500
Property, plant and equipment, net of $502,000 accumulated depreciation
1,002,000
Total assets
$ 1,255,500
Liabilities and Stockholders Equity
Accounts payable
$ 272,000
Common stock
780,000
Retained earnings
203,500
Total liabilities and stockholders equity
$ 1,255,500
Retained earnings at the end of December would be:
$203,500
$296,000
$236,400
$289,600
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