Timberline Ltd. manufactures and sells a single product. The company is preparin

Question

Timberline Ltd. manufactures and sells a single product. The company is preparing a monthly budget for the first quarter of 20x1. The following information has been accumulated: a. Projected sales for December 20xO are $600,000. For the first quarter, the company believes that sales will increase by 10% each month over the previous month's sales. Sales will then remain constant for the second quarter. Sales on account are typically 75% of total sales. Records indicate that 55% of the credit sales are collected during the month of sale, and the remainder are collected during the following month. b. Management has determined that an ending inventory equal to 25% of next month's sales is required to fit sales demands. Cost of goods sold are typically 65% of sales. Inventory is purchased on account. Timberline pays for 20% of a month's purchases in the month of purchase and the remainder in the following month. C. d. Monthly expenses are estimated as follows: $10,000 1,000 7,000 15,000 16,000 25,000 Training and development . Property and business taxes .Supervisor's salary . Depreciation Insurance . Administrative salaries Property and business taxes are paid on March 31t for the six month period. Sales commissions are 2% of gross sales. ·

Explanation / Answer

Budgeted Income Statement

Net sales

Less:cost of goods sold

Gross margin

Less:selling&admin.exp.

Net operating income

Less:Interest exp.

Net income

Statement of retained earnings

Retained earnings at Dec'31 20x0   

Net income for the year end dec'31 20x1

Dividend paid to shareholders

Retained earnings at Dec'31 20x1

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