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    Budgeted income statement& balance sheet

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    Handy Hardware is a retail hardware store. Information about the store's operation follows.

    a. November 20x1 sales amounted to $200,000
    b. Sales are budgeted at $220,000 for December 20x1 and $200,000 for January 20x2.
    c. Collections are expected to be 60 percent in the month of sale and 38 percent in the month following the sale. Two percent of sales are expected to be uncollectible. Bad debt expense is recognized monthly.
    d. The store's gross margin is 25 percent of its sales revenue
    e. A total of 80 percent of the merchandise for resale is purchased in the month prior to the month of sale, and 20 percent is purchased in the month of sale. Payment for merchandise is made in the following month of purchase.
    f.Other monthly expenses paid in cash amount to $22,600
    g. Annual depreciation is $216,000

    The company's Balance Sheet as of November 30, 20x1, is a sfollows:

    Handy Hardware Inc.
    Balance Sheet
    November 30, 20x1

    Cash $22,000
    A.R. (net of $3,500 allowance for uncollectible accounts 76,000
    Inventory 140,000
    Property, plant, and equipment (net of $590,000 accumulated) 862,000

    Total Assets $1,100,000

    Liabilities and Stockholder Equity
    A.P. $162,000
    Common Stock 795,000
    Retained Earnings 143,000

    Total Liabilities and Stockholder Equity $1,100,000

    Compute the following

    1. The budgeted cash collections for December 20x1

    2. The budgeted income (lose) before income taxes for December 20x1

    3. The projected balance in accounts payable on December 31, 20x1.

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    Solution Summary

    The answer contains the preparation of budgeted income statement, budgeted balance sheet and also the cash budget.