Reference no: EM132835978
Question - Green Friends Ltd is a garden design and landscaping business that started operations on 1 September 2020. The following information has been provided by the firm.
In September, cash sales were $15,000 and credit sales $35,000. Total expected sales in the following three months are: $60,000 in October; $80,000 in November; and $95,000 in December. The company expects 30% of the sales of each month to be cash sales and the remainder credit sales. Credit sales are expected to be collected 60% in the month of the sale, 20% in the next month, and 20% in the following month.
All purchases of inventory are on credit. Purchases of inventory in September were $30,000. The company estimates purchases in the following three months to be: $26,000 in October, $30,000 in November and $32,000 in December. Purchases are paid 60% in the month of purchase, and 40% in the following month.
Wages expense is estimated to be $20,000 in October, $22,000 in November and $22,000 in December, paid in cash.
Other operating expenses are budgeted to be $24,000 in October, $26,000 in November and $30,000 in December, paid in cash.
Depreciation expenses of $1,200 are expected in October and $1,500 in November and December.
The cost of sales is estimated as 40% of sales revenue each month.
At the beginning of October, a truck was purchased for $30,000 and paid cash.
On 1st December an advance payment of $25,000 will be paid to start a building construction.
Cash proceeds for a loan to be received on October: $40,000.
The cash balance at 1st October 2020 was $5,500.
Required - Create a Budgeted Income Statement for the period October - December 2020.
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