Carpon Lumber sells lumber and general building supplies to building contractors
ID: 2483924 • Letter: C
Question
Carpon Lumber sells lumber and general building supplies to building contractors in a medium-sized town in Montana. Data regarding the store's operations follow: • Sales are budgeted at $470,000 for November, $480,000 for December, and $500,000 for January • Collections are expected to be 72% in the month of sale, 25% in the month following the sale, and 3% uncollectible. • The cost of goods sold is 70% of sales. • The company desires to have an ending merchandise inventory equal to 60% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase. • Other monthly expenses to be paid in cash are $27,600. • Monthly depreciation is $20,000. • Ignore taxes. Statement of Financial Position October 31 Assets Cash $24,000 Accounts receivable (net of allowance for uncollectible accounts) 82,000 Inventory 197,400 Property, plant and equipment (net of $611,000 accumulated depreciation) 1,151,000 Total assets $1,454,400 Liabilities and Stockholder' Equity Accounts payable $137,000 Common stock 720,000 Retained earnings 597,400 Total liabilities and stockholder' equity $1,454,400
Explanation / Answer
Carpon Lumber All Amounts in $ Budgeted Cash Receipts for November and December November December Total Bad Debts From October Sales 82000 82000 From November Sales 338400 117500 455900 14100 From December Sales 345600 345600 14400 Total 420400 463100 883500 28500 Budgeted Purchases for November and December November December Total Opening Inventory 197400 201600 197400 Purchases 333200 344400 677600 Closing Inventory 201600 210000 210000 Cost of Goods Sold 329000 336000 665000 Budgeted Payments for Purchases in November and December November December Total From October Purchases 137000 137000 From November Purchases 333200 333200 Total 137000 333200 470200 Closing Cash Balance as on December Opening Cash Balance 24000 Add : Collections from Sales 883500 907500 Less : Payments for Purchases 470200 Less : Monthly Expenses 55200 525400 Closing Cash Balance 382100 Income Statement for November and December Sales 950000 Cost of Goods Sold 665000 Contribution Margin 285000 Less : Direct Expenses 55200 Less : Provision for Bad Debts 28500 Less : Depreciation 40000 123700 Retained Earnings 161300 Balance Sheet as on December 31 Assets Cash 382100 Accounts Receivable (Net of Provision for Bad Debts) 120000 Inventory 210000 Property, Plant and Equipment 1111000 (Net of $ 651,000 Accumulated Depreciation) Total Assets 1823100 Liabilities and Shareholders' Equity Accounts Payable 344400 Common Stock 720000 Retained Earnings 758700 Total Liabilities and Shareholders' Equity 1823100