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Q1) Terry's Equipment Center has been organized to sell line of lawn and garden equipments. Company start operations on January 1 with the following assets.

Cash - $14,000
Inventory - 29,000
Land - 31,000
Buildings and equipments - $250,000

(Useful life 20 years, no residual value, of which $210,000 relates to selling and $40,000 to general and administrative activities)

Sales for January, February, and March (that is, first quarter) are expected to $140,000; they are expected to be $280,000 for next three months, and $325,000 three months after that. Certain expenses are expected to differ with sales as follows:

  Percent of Sales Dollars
Cost of goods sold 60
Bad debts 2
Variable selling expenses 14
Variable administrative expenses 5

Other expenses not expected to differ with sales:

Selling $25,000 per quarter
Administrative 18,550 per quarter
Depreciation 3,125 per quarter

problem:

Make operating budget for first and second quarters of operations of Terry's Equipment Center.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M919609

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