Question

Handy Hardware is a retail hardware store. Information about the stores operations follows. • November 20x1 sales amounted to $410,000. • Sales are budgeted at $450,000 for December 20x1 and $410,000 for January 20x2. • Collections are expected to be 70 percent in the month of sale and 28 percent in the month following the sale. Two percent of sales are expected to be uncollectible. Bad debts expense is recognized monthly. The store's gross margin is 30 percent of its sales revenue. A total of 70 percent of the merchandise for resale is purchased in the month prior to the month of sale, and 30 percent is purchased in the month of sale. Payment for merchandise is made in the month following the purchase. Other monthly expenses paid in cash amount to $45,300. . Annual depreciation is $435,000. The company's balance sheet as of November 30, 20x1, is as follows: HANDY HARDWARE, INC. Balance Sheet November 30, 20x1 Assets Cash $ 45,000 Accounts receivable (net of $7,100 allowance for uncollectible accounts) 153,000 Inventory 290,000 Property, plant, and equipment (net of $1,190,000 accumulated depreciation) 1,734,000 Total assets $2,222,000 Liabilities and Stockholders' Equity Accounts payable $ 306,600 Common stock 1,600,000 Retained earnings 315,400 Total liabilities and owner's equity $2,222,000 Required: 1. Compute the budgeted cash collections for December 20x1. 2. Compute the budgeted income (loss) before income taxes for December 20x1. 3. Compute the projected balance in accounts payable on December 31, 20x1.