The Adams Corporation, a merchandising firm, has budgeted its activity for Novem

Question

The Adams Corporation, a merchandising firm, has budgeted its activity for November according to the following information:

• Sales at $596,000, all for cash.
• Merchandise inventory on October 31 was $234,000.
• The cash balance November 1 was $18,800.
• Selling and administrative expenses are budgeted at $68,100 for November and are paid for in cash.
• Budgeted depreciation for November is $26,400.
• The planned merchandise inventory on November 30 is $267,300.
• The cost of goods sold is 80% of the selling price.
• All purchases are paid for in cash.
• There is no interest expense or income tax expense.

The budgeted net income for November is:

$24,700

$51,100

$42,700

$119,200

Explanation / Answer

Sales $596,000 Less: Cost of goods sold          476,800 (80% of sales) Gross profit $119,200 Less: Selling and administrative expenses            68,100 Less: Depreciation            26,400 Budgeted Net Income $24,700 Option A

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