Question - Master budget Adams Company, a merchandising firm that sells one product, estimates it will sell 12,000 units of its product at $60 per unit in December. In November, the company prepared other information to prepare a budget for December, as shown here:
Merchandise inventory, December 1 2,000 units
Desired merchandise inventory for December 31 3,000 units
Cost per unit of merchandise purchases $40
Selling and administrative expenses $200,000
Cash balance, December 1 $30,000
November sales $600,000
- The company estimates that 60% of each month's sales are collected in the month of sale and that the remaining 40% is collected in the month after sale.
- The $200,000 of selling and administrative expenses includes $40,000 of depreciation.
- The company pays for half of merchandise purchases during the month of purchase and pays the remainder during the month following purchase. Estimated merchandise purchases for November are $340,000.
- All other out-of-pocket expenses are paid for in cash.
Required: Prepare a budgeted income statement for the month ended December for Adams Company.