High Plains Lumber Sells Lumber and General Building Supplies to Building

High Plains Lumber sells lumber and general building supplies to building contractors in a medium-sized town in North Dakota. Data regarding the store's operations follow:
? Sales are budgeted at $340,000 for November, $350,000 for December, and $370,000 for January.
? Collections are expected to be 55% in the month of sale, 44% in the month following the sale, and 1% uncollectible.
? The cost of goods sold is 75% of sales.
? The company purchases 60% of its merchandise in the month prior to the month of sale and 40% in the month of sale. Payment for merchandise is made in the month following the purchase.
? Other monthly expenses to be paid in cash are $21,100.
? Monthly depreciation is $19,000.
? Ignore taxes.

Required:
a. Determine the net income for December.
b. Determine the cash balance at the end of December.
c. Calculate the accounts receivable balance, net of uncollectible accounts, at the end of December.
d. Determine the accounts payable at the end of December.
e. Determine the balance in Retained earnings at the end of December.

Correct Answer:

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a. Budgeted Income Statement
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