Units Purchased & Income Statement
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Master budget, Adams Company, a merchandising firm that sells one product, estimates it will sell 12,000 units of its product at $60 per unit in December. The company has prepared other information to prepare a budget for December, as shown here:
Merchandise inventory, December 1 2,000 units
Desired merchandise inventory for December 31 3,000 units
Cost per unit of merchandise purchases $40
Selling and administrative expenses $200,000
Cash balance, December 1 $30,000
November sales $600,000
? The company estimates that 60% of each month's sales are collected in the month of sale and that the remaining 40% is collected in the month after sale.
? The $200,000 of selling and administrative expenses includes $40,000 of depreciation.
? The company pays for half of merchandise purchases during the month of purchase and pays the remainder during the month following purchase. Estimated merchandise purchases for November are $340,000.
? All other out-of-pocket expenses are paid for in cash.
a. How many units of merchandise will Adams budget to purchase in December? What is the dollar amount of Adam's budgeted merchandise purchases for December?
b. Prepare a budgeted income statement for the month ended December for Adams Company.
c. Prepare a statement of estimated cash flows for the month ended December for Adams Company.
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Purchase Budget showing units purchased and dollar amount of purchase, Sales Budget, Cash Budget and Budgeted Income statement are attached in Excel.
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