The Adams Corporation, a merchandising firm, has budgeted its activity for November according to the following information: • Sales at $450,000, all for cash.
• Merchandise inventory on October 31 was $200,000.
• The cash balance November 1 was $18,000.
• Selling and administrative expenses are budgeted at $60,000 for November and are paid for in cash.
• Budgeted depreciation for November is $25,000.
• The planned merchandise inventory on November 30 is $230,000.
• The cost of goods sold is 70% of the selling price.
• All purchases are paid for in cash.
• There is no interest expense or income tax expense.
The budgeted net income for November is:
A)$50,000
B)$68,000
C)$75,000
D)$135,000

Question

Quizplus · Accepted Answer

The budgeted net income for November is $50,000. This is calculated as follows:Sales: $450,000Cost of goods sold (70% of sales): $315,000Gross profit: $135,000Selling and administrative expenses: $60,000Depreciation: $25,000Net income: $50,000

The Adams Corporation, a Merchandising Firm, Has Budgeted Its Activity