The Bandeiras Company, a merchandising firm, has budgeted its activity for December according to the following information:

I. Sales at $550,000, all for cash.
II. Merchandise inventory on November 30 was $300,000.
III. Budgeted depreciation for December is $35,000.
IV. The cash balance at December 1 was $25,000.
V. Selling and administrative expenses are budgeted at $60,000 for December and are paid in cash.
VI. The planned merchandise inventory on December 31 is $270,000.
VII. The invoice cost for merchandise purchases represents 75% of the sales price. All purchases are paid for in cash.

-What is the budgeted net income for December?
A) $42,500.
B) $77,500.
C) $107,500.
D) $137,500.

Question

The Bandeiras Company, a merchandising firm, has budgeted its activity for December according to the following information:

I. Sales at $550,000, all for cash.
II. Merchandise inventory on November 30 was $300,000.
III. Budgeted depreciation for December is $35,000.
IV. The cash balance at December 1 was $25,000.
V. Selling and administrative expenses are budgeted at $60,000 for December and are paid in cash.
VI. The planned merchandise inventory on December 31 is $270,000.
VII. The invoice cost for merchandise purchases represents 75% of the sales price. All purchases are paid for in cash.

-What is the budgeted net income for December?
A) $42,500.
B) $77,500.
C) $107,500.
D) $137,500.

Quizplus · Accepted Answer

The budgeted net income for December is $42,500. This is calculated as follows:Sales: $550,000Less: Cost of goods sold (75% of sales): $412,500Gross profit: $137,500Less: Selling and administrative expenses: $60,000Less: Depreciation: $35,000Net income: $42,500

The Bandeiras Company, a Merchandising Firm, Has Budgeted Its Activity