7/ Calgary Industries is preparing a budgeted income statement for 2018 and has

Question

7/ Calgary Industries is preparing a budgeted income statement for 2018 and has accumulated the following information. Predicted sales for the year are $755,000 and cost of goods sold is 40% of sales. The expected selling expenses are $83,500 and the expected general and administrative expenses are $92,500, which includes $25,500 of depreciation. The company's income tax rate is 30%. The budgeted net income for 2018 is:

Multiple Choice

$453,000.

$193,900.

$277,000.

$85,200.

$83,100.

8/ Southland Company is preparing a cash budget for August. The company has $17,500 cash at the beginning of August and anticipates $121,800 in cash receipts and $135,000 in cash disbursements during August. Southland Company wants to maintain a minimum cash balance of $10,000. The preliminary cash balance at the end of August before any loan activity is:

Multiple Choice

$14,300.

$139,300.

($13,200).

$4,300.

$27,500.

Explanation / Answer

Dear student, only one question is allowed at a time. I am answering the first question

Gross profit

= Sales x (1 – cost of goods sold)

= $755,000 x (1 – 0.40)

= $755,000 x 0.60

= $453,000

Net Income

= (Gross profit - selling expenses - general and administrative expenses) x (1 – Tax rate)

= ($453,000 - $83,500 - $92,500) x (1 – 0.30)

= $277,000 x 0.70

= $193,900

So, as per above calculations, option B is the correct option

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