Question taxes are 35 percent of pretax income and are paid

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Reference no: EM13349603

Question :

Taxes are 35 percent of pretax income and are paid in the quarter incurred. 50 percent of sales are collected in the quarter of sale and 50 percent are collected in the next quarter. 70 percent of purchases are paid in the quarter of buy and 30 percent are paid in the next quarter. Administrative and Selling expenses are paid in the quarter incurred except for $7,000 of depreciation added in the administrative and selling expense. A capital expenditure for $20,000 is planned for the fourth quarter of 2015.

Q1 Q2 Q3 Q4

Sales 400,000 475,000 550,000 600,000

Cost of sales 170,000 185,000 220,000 230,000

Purchases 160,000 200,000 225,000 267,000

Selling and admin expense 67,000 69,000 71,000 73,000

Sales 550,000

Less cost of sales 250,000

Gross margin 300,000

Selling and admin expense 70,000

Income before taxes 230,000

Income taxes 80,500

Net income 149,500

Reference no: EM13349603

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