Question

Assume a merchandising company provides the following information from its master budget for the month of May: Sales $ 140,000 Cash paid for merchandise purchases $ 94,000 Selling and administrative expenses $ 34,000 Accounts payable, May 1st $ 27,000 Accounts payable, May 31st $ 35,000 If the company maintains no beginning or ending merchandise inventory and makes all of its inventory purchases on account, what is the budgeted net operating income for May?

Answer 1

Based on the sales, purchases, and other entries, the budgeted net operating income for May is $4,000.

What is the budget net operating income?

This can be found as:

= Sales - Cost of goods sold - Selling and admin expenses

Cost of goods sold:

= Purchases paid in cash + Ending accounts receivable - Beginning accounts payable

= 94,000 + 35,000 - 27,000

= $102,000

Budgeted net income:

= 140,000 - 109,000 - 34,000

= $4,000

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