Goldberg Company is a retail sporting goods store that uses an accrual accountin
ID: 2474266 • Letter: G
Question
Goldberg Company is a retail sporting goods store that uses an accrual accounting system. Facts regarding its operations follow:
•
Sales are budgeted at $280,000 for December and $250,000 for January, terms 1/eom, n/60.
•
Collections are expected to be 50% in the month of sale and 48% in the month following the sale. Two percent of sales are expected to be uncollectible and recorded in an allowance account at the end of the month of sales. Bad debts expense is included as part of operating expenses.
•
Gross margin is 30% of sales.
•
All accounts receivable are from credit sales. Bad debts are written off against the allowance account at the end of the month following the month of sale.
•
Goldberg desires to have 80% of the merchandise for the following month’s sales on hand at the end of each month. Payment for merchandise is made in the month following the month of purchase.
•
Other monthly operating expenses to be paid in cash total $22,400.
•
Annual depreciation is $198,000, one-twelfth of which is reflected as part of monthly operating expenses.
Goldberg Company’s statement of financial position at the close of business on November 30 follows:
GOLDBERG COMPANY
Statement of Financial Position
November 30, 2016
Assets
Cash
$
23,000
Accounts receivable (net of $4,000 allowance for doubtful accounts)
66,000
Inventory
156,800
Property, plant, and equipment (net of $630,000 accumulated depreciation)
1,010,000
Total assets
$
1,255,800
Liabilities and Stockholders’ Equity
Accounts payable
$
143,000
Common stock
800,000
Retained earnings
312,800
Total liabilities and equity $1,255,800
1. What is the total of budgeted cash collections for December? (Do not round intermediate calculations.)
2. How much is the book value of accounts receivable at the end of December? (Do not round intermediate calculations.)
3. How much is the income (loss) before income taxes for December? (Do not round intermediate calculations.)
4. What is the projected balance in inventory on December 31, 2016? (Do not round intermediate calculations.)
5. What are budgeted purchases for December? (Do not round intermediate calculations.)
6. What is the projected balance in accounts payable on December 31, 2016? (Do not round intermediate calculations.)
Total liabilities and equity
$
1,255,800
Goldberg Company is a retail sporting goods store that uses an accrual accounting system. Facts regarding its operations follow:
Explanation / Answer
Answer 1 Answer 2 Budgeted cash collection for December Book value of account receivable at the end of december December Sale $2,80,000 Account receivable Ledger for December Debit Credit Collections To balance b/d 70000 By cash 205800 - December sales $1,38,600 To sales 280000 By discount 1400 - November sales {($70000/50%) * 48%} $67,200 By Allowance for doubtful accounts 2800 Total collection $2,05,800 By balance c/f 140000 350000 350000 Answer 3 Calculation Income /(loss) before Income tax for December Allowance for doubtful accounts Debit Credit Sales $2,80,000 To Account receivable 2800 By balance b/d 4000 Less : Cost of goods sold -$1,96,000 By Bad debt 5600 Gross Margin (30% on sales) $84,000 Less : Bad debt -$5,600 To balance c/f 6800 Less : Sale Discount -$1,400 9600 9600 Less: Operating exp. -$22,400 Less: Depreciation -$16,500 Net Income before taxes $38,100 Net Book value of accounts receivable at the end of December = $140000 - $6800 = $133200 Answer 4 Projected balance in inventory as on December 31,2016 Sale for the month of January $2,50,000 Cost of goods sold (70% of sales) $1,75,000 Inventory to be kept at the end of december (80% of cost of goods sold) $1,40,000 Answer 5 Budgeted purchases for December Inventory balance at the end $1,40,000 (+) Cost of goods sold for december $1,96,000 (-) Inventory balance at the beginning $1,56,800 Budgeted purchases for December $1,79,200 Answer 6 Projected balance in Accounts payable as on December 31,2016 Balance at the beginning $1,43,000 (+) Purchases during december $1,79,200 (-) Payment during december $1,43,000 Accounts payable balance as on December 31,2016 $1,79,200
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