The data bellow regards The Bag House, a store that sells bags. Budgeted sales (

Question

The data bellow regards The Bag House, a store that sells bags. Budgeted sales (credit); for January, February, and March are $420,000, $310,000 and $280,000. Budgeted collections: 60% in month of sale, 30% in following month, and 10% uncollectable. Cost of goods sold: 50% of sales. Purchases of merchandize: 30% in month prior to sale, and 70% in month of sale. Payment for purchases: 80% in month of purchase and 20% in following month. Selling and administrative costs: $32,500 paid in cash monthly. Depreciation of office equipment: $21,500 monthly. 8. What is February’s net income (loss) before interest and taxes? m u A. $68,500 $89,000 $75,500 D. $70,000 E. None of the above

Explanation / Answer

Sales 310000 Expenses: Cost of goods sold 155000 =310000*50% Selling and administrative expenses 32500 Depreciation 21500 Total expenses 209000 Net income(loss) 101000 Option E none of the above is correct

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