Problem 1: The following information is used for Lucky\'s Inc. The following inf
ID: 2376878 • Letter: P
Question
Problem 1:
The following information is used for Lucky's Inc.
The following information is used for Lucky's Inc.'s monthly master budget. Sales are 25% cash and 75% on credit. All credit sales are collected in the following month. There are no bad debts Gross margin percentage is 60% of sales. The desired ending inventory is expected to be 20% of the following month's cost of goods sold. One fifth of the purchases are paid for in the month of purchase, and the remaining balance is purchased on credit and paid in the following month. The monthly cash operating expenses are $80,000, including the monthly depreciation expense of $7,000. During July, Lucky's Inc. will purchase new office equipment for $17,000 cash. Dividends of $13,500 were declared and paid in July. The company must maintain a minimum cash balance of $25,000. A line of credit is used to maintain this balance. Borrowing will be made in increments of $1,000. All borrowing is done at the beginning of the month, and repayments are made at the end of the month. The annual interest rate is 12%, paid when the loan is repaid (ignore accrual of interest). Prepare a balance sheet, income statement, and cash budget for the month of July.Explanation / Answer
income statement
sales 320000
less:expenses 87000
dividend 13500
interest 10
net income 219490
cash budget
sales(cash) 80000
sales (credit) 240000
less:purchase of
equipment 17000
net cash 63000
Balance sheet
cash 25000 accounts payable 93440
inventory 14400 capital stock 260000
accounts receivable 240000 retained earnings 2740
buiding and equipment217000