Macheski Company, an Importer and Retailer of Polish Pottery and Kitchenware

question 111

Multiple Choice

Macheski Company, an importer and retailer of Polish pottery and kitchenware, prepares a monthly master budget. Data for the July master budget are given below: The June 30th balance sheet follows: $$\begin{array}{l}\begin{array} { l l r } \text { Cash } & \$ 25,000 \text { Accounts payable } & \$ 45,000 \\\text { Accounts receivable } & 110,000 \text { Capital stock } & 300,000 \\\text { Inventory } & 54,000 \text { Retained earnings } & 94,000 \\\text { Buil ding and equipment (net) } & 250,000 &\end{array}\\\text { Actual sales for June and budgeted sales for July, August, and September are given below: }\\\begin{array} { l r } \text { June } & \$ 137,500 \\\text { July } & 360,000 \\\text { August } & 400,000 \\\text { September } & 320,000\end{array}\end{array}$$ Sales are 20 percent for cash and 80 percent on credit. All credit sales are collected in the month following the sale. There are no bad debts.
The gross margin percentage is 40 percent of sales. The desired ending inventory is equal to 25 percent of the following month's sales. One fourth of the purchases are paid for in the month of purchase and the others are purchased on account and paid in full the following month.
The monthly cash operating expenses are $43,000, and the monthly depreciation expenses are $7,000.
What is the balance of the retained earnings account at the end of July?

• A)$94,000
• B)$188,000
• C)$360,000
• D)$398,000

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