Carter Lumber sells lumber and general bulding supplies to bulding contractors I

ID: 2438244 • Letter: C

Question

Carter Lumber sells lumber and general bulding supplies to bulding contractors In a medium-stzed town in Montana. Deta regarding the store's operations follow o Sales are budgeted at $404,000 for November, $414,000 for December, and $424,000 for January ° collections are expected to be 70% in the month of sale, 27% in the month following the sale, and 3% uncollectible o The cost of goods sold is 75% of sales. o The company desires to have an ending merchandise inventory equal to 80% of the following month's cost of goods sold. Payment for merchandise is made in the month folowing the purchase. o Other monthly expenses to be pald in cash are $22.550 o Monthly depreciation is $24,600. o Ignore taxes Belance Sheer October 31 Assets s 17.200 93.800 214,500 1024,000 $1,349,300 Cosh Accounts receiveble, net of allowance for uncollectible accounts Property, plant and equipment, ne of $512,000 accumulased depreclation Total essess Liobilinies and Stockholders Equity Accounts payable Common stock Retained eemings Total labilities and stockholders equity $249.000 780000 20.300 1,349 300 10 12 13 The net income for December would 14 15 O $80.950 O 556.350 O s66000 O $43.930 16 17 18 Ready O Type here to search

Explanation / Answer

Solution:

Calculation of Net Income for December month

December

Budgeted Sales

$414,000

Budgeted Cost of Goods Sold (75% of Sales 414,000)

$310,500

Gross Margin

$103,500

Other monthly expenses

$22,550

Depreciation

$24,600

Net Income

$56,350

The correct option is $56,350

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