Merchandise inventory, June 1 $393,250 Merchandise inventory,May 31 380,100 Purchases 1,579,600 Purchases returns and allowances81,200 Purchases discounts 16,500 Sales 2,060,000 Freight in 59,250Required: Using the above data taken from Payton Inc. which uses aperiodic inventory system, deter determine the gross profit to bereported on the income statement for the year ended May 31.
Merchandise inventory, June 1 $393,250 Merchandise inventory,May 31 380,100 Purchases 1,579,600 Purchases returns and allowances81,200 Purchases discounts 16,500 Sales 2,060,000 Freight in 59,250Required: Using the above data taken from Payton Inc. which uses aperiodic inventory system, deter determine the gross profit to bereported on the income statement for the year ended May 31.
Related questions
| LIFO Perpetual Inventory The beginning inventory of merchandise at Keats Office Suppliesand data on purchases and sales for a three-month period are asfollows:
Required: 1. Record the inventory, purchases, and cost ofmerchandise sold data in a perpetual inventory record similar tothe one illustrated in Exhibit 4, using the last-in, first-outmethod. If units are in inventory at two different costs, enter theOLDEST units first.
2. Determine the total sales, the total cost ofmerchandise sold, and the gross profit from sales for theperiod.
3. Determine the ending inventory cost as ofMay 31, 2014. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Problem 8-25 Cash Budget with Supporting Schedules; Changing Assumptions [LO8-2, LO8-4, LO8-8]
Garden Sales, Inc., sells garden supplies. Management is planning its cash needs for the second quarter. The company usually has to borrow money during this quarter to support peak sales of lawn care equipment, which occur during May. The following information has been assembled to assist in preparing a cash budget for the quarter:
Budgeted monthly absorption costing income statements for AprilâJuly are:
| April | May | June | July | |||||
| Sales | $ | 610,000 | $ | 1,110,000 | $ | 570,000 | $ | 470,000 |
| Cost of goods sold | 427,000 | 777,000 | 399,000 | 329,000 | ||||
| Gross margin | 183,000 | 333,000 | 171,000 | 141,000 | ||||
| Selling and administrative expenses: | ||||||||
| Selling expense | 113,000 | 106,000 | 68,000 | 47,000 | ||||
| Administrative expense* | 48,500 | 65,600 | 42,200 | 45,000 | ||||
| Total selling and administrative expenses | 161,500 | 171,600 | 110,200 | 92,000 | ||||
| Net operating income | $ | 21,500 | $ | 161,400 | $ | 60,800 | $ | 49,000 |
*Includes $29,000 of depreciation each month.
Sales are 20% for cash and 80% on account.
Sales on account are collected over a three-month period with 10% collected in the month of sale; 70% collected in the first month following the month of sale; and the remaining 20% collected in the second month following the month of sale. Februaryâs sales totaled $265,000, and Marchâs sales totaled $280,000.
Inventory purchases are paid for within 15 days. Therefore, 50% of a monthâs inventory purchases are paid for in the month of purchase. The remaining 50% is paid in the following month. Accounts payable at March 31 for inventory purchases during March total $121,100.
Each monthâs ending inventory must equal 20% of the cost of the merchandise to be sold in the following month. The merchandise inventory at March 31 is $85,400.
Dividends of $36,000 will be declared and paid in April.
Land costing $44,000 will be purchased for cash in May.
The cash balance at March 31 is $58,000; the company must maintain a cash balance of at least $40,000 at the end of each month.
The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $200,000. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter
The companyâs president is interested in knowing how reducing inventory levels and collecting accounts receivable sooner will impact the cash budget. He revises the cash collection and ending inventory assumptions as follows:
Sales continue to be 20% for cash and 80% on credit. However, credit sales from April, May, and June are collected over a three-month period with 25% collected in the month of sale, 65% collected in the month following sale, and 10% in the second month following sale. Credit sales from February and March are collected during the second quarter using the collection percentages specified in the main section.
The company maintains its ending inventory levels for April, May, and June at 15% of the cost of merchandise to be sold in the following month. The merchandise inventory at March 31 remains $85,400 and accounts payable for inventory purchases at March 31 remains $121,100.
Required:
1. Using the presidentâs new assumptions in (1) above, prepare a schedule of expected cash collections for April, May, and June and for the quarter in total.
2. Using the presidentâs new assumptions in (2) above, prepare the following for merchandise inventory:
a. A merchandise purchases budget for April, May, and June.
b. A schedule of expected cash disbursements for merchandise purchases for April, May, and June and for the quarter in total.
3. Using the presidentâs new assumptions, prepare a cash budget for April, May, and June, and
for the quarter in total.
