Carter Lumber Sells Lumber and General Building Supplies to Building

Carter 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 $380,000 for November, $390,000 for December, and $400,000 for January.
• Collections are expected to be 70% in the month of sale, 27% in the month following the sale, and 3% uncollectible.
• The cost of goods sold is 65% of sales.
• The company desires to have an ending merchandise inventory equal to 80% of the following 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 $22,000.
• Monthly depreciation is $20,000.
• Ignore taxes.


-The net income for December would be:

A) $114,500
B) $94,500
C) $101,400
D) $82,800

Correct Answer:

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