The Bandeiras Corporation, a merchandising firm, has budgeted its activity for December according to the following information: a. Sales at $550,000, all for cash.
b. Merchandise inventory on November 30 was $300,000.
c. The cash balance at December 1 was $25,000.
d. Selling and administrative expenses are budgeted at $60,000 for December and are paid in cash.
e. Budgeted depreciation for December is $35,000.
f. The planned merchandise inventory on December 31 is $270,000.
g. The cost of goods sold is 75% of the sales price. All purchases are paid for in cash.
h. There is no interest expense or income tax expense.

Required:
a. What are the budgeted cash receipts for December?
b. What are the budgeted cash disbursements for December?
c. What is the budgeted net income for December?

a. $550,000

b. $472,500

c. $12,500

Explanation:

a. Calculation to determine the budgeted cash receipts for December

Budgetted Cash receipts

Cash sales $550,000

Therefore the budgeted cash receipts for December is $550,000 since there is no other receipts which means that the Cash sales of the amount of $550,000 will represent the whole Cash receipts

b. Calculation to determine the budgeted cash disbursements for December

BUDGETED CASH DISBURSEMENTS for December

Cash purchases $412,500

($550,000*75%)

Add Selling and administrative expenses budgeted $60,000

Total Cash disbursement $472,500

Therefore the budgeted cash disbursements for December is $472,500

c. Calculation to determine the budgeted net income for December

BUDGETED NET INCOME FOR DECEMBER

Sales $550,000

Less Cost of goods sold ($442,500)

($300,000+$412,500-$270,000)

Gross margin $107,500

($550,000-$442,500)

Less: Operating Expense

Selling and administrative expense ($60,000)

Depreciation expense ($35,000)

Net income $12,500

($107,500-$60,000-$35,000)

Therefore the budgeted net income for December is $12,500

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