Reference no: EM132561647
Auto Hardware is a retail hardware store. Information about the store's operations follows.
- November 2019 sales amounted to Rs.400,000.
- Sales are budgeted at Rs.440,000 for December 2019 and Rs.400,000 for January 20x5.
- 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 debts expense is recognized monthly.
- The store's gross margin is 25 percent of its sales revenue.
- 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 month following the purchase.
- Other monthly expenses paid in cash amount to Rs.45,200.
- Annual depreciation is Rs.432,000.
The company's balance sheet as of November 30, 2019, is as follows:
AUTO HARDWARE, INC.
BALANCE SHEET
NOVEMBER 30, 2019
ASSETS
Cash Rs. 44,000
Accounts receivable
(Net of Rs.7,000 allowance for uncollectible accounts) Rs. 152,000
Inventory Rs. 280,000
Property, plant, and equipment
(Net of Rs.1,180,000 accumulated depreciation) Rs. 1,724,000
Total Assets Rs. 2,200,000
LIABILITIES AND OWNER'S EQUITY
Accounts payable Rs. 324,000
Common stock Rs. 1,590,000
Retained earnings Rs. 286,000
Total liabilities and owner's equity Rs.2,200,000
Required:
Question 1: Compute the following amounts.
1. The budgeted cash collections for December 2019.
2. The budgeted income (loss) before income taxes for December 2019.
3. The projected balance in accounts payable on December 31, 2019.