Dilbert Farm Supply is located in a small town in the rural west.Data regarding the store's operations follow: o Sales are budgeted at $260,000 for November,$230,000 for December,and $210,000 for January.
O Collections are expected to be 80% in the month of sale,19% in the month following the sale,and 1% uncollectible.
O The cost of goods sold is 65% of sales.
O The company desires to have an ending merchandise inventory at the end of each month equal to 60% of the next month's cost of goods sold.Payment for merchandise is made in the month following the purchase.
O Other monthly expenses to be paid in cash are $20,300.
O Monthly depreciation is $20,000.
O Ignore taxes. The net income for December would be:

Question

Dilbert Farm Supply is located in a small town in the rural west.Data regarding the store's operations follow: o Sales are budgeted at $260,000 for November,$230,000 for December,and $210,000 for January.
O Collections are expected to be 80% in the month of sale,19% in the month following the sale,and 1% uncollectible.
O The cost of goods sold is 65% of sales.
O The company desires to have an ending merchandise inventory at the end of each month equal to 60% of the next month's cost of goods sold.Payment for merchandise is made in the month following the purchase.
O Other monthly expenses to be paid in cash are $20,300.
O Monthly depreciation is $20,000.
O Ignore taxes.  The net income for December would be:

Quizplus · Accepted Answer

First, we need to calculate the cost of goods sold for each month:
November: $260,000 x 65% = $169,000
December: $230,000 x 65% = $149,500
January: $210,000 x 65% = $136,500

Next, we can calculate the desired ending merchandise inventory for each month:
November: $149,500 x 60% = $89,700
December: $136,500 x 60% = $81,900
January: $0 (since this is the last month)

Now, we can use this information to create a budgeted income statement for December:

Sales: $230,000 
Cost of goods sold: $149,500 
Gross profit: $80,500

Expenses:
Other monthly expenses: $20,300 
Depreciation: $20,000 
Total expenses: $40,300

Net income before taxes: $40,200

Therefore, the correct answer is B) $37,900.

Dilbert Farm Supply Is Located in a Small Town in the Rural