The Following Information Relates to DFW Corporation

question 1

Essay

The following information relates to DFW Corporation:
· All sales are on account and are budgeted as follows: February,$350,000;March,$360,000;and April,$400,000.DFW collects 70% of its sales in the month of sale and 30% in the following month.
· Cost of goods sold averages 60% of sales.Purchases total 65% of the following month's sales and are paid in the month following acquisition.
· Cash operating expenses total $60,000 per month and are paid when incurred.Monthly depreciation amounts to $18,000.
· Selected amounts taken from the January 31 balance sheet were: accounts receivable,$115,000;plant and equipment (net),$107,000;and retained earnings,$85,000.
Required: (NOTE: Ignore income taxes in answering these questions).
A.

A.Prepare a budgeted income statement that summarizes activity for the two months ended March 31,20x1.
B.Accounts receivable: $115,000 - $115,000 + $350,000 - ($350,000 * 70%)+ $360,000 - ($350,000 * 30%)- ($360,000 *70%)= $108,000
Plant and equipment (net): $107,000 - $18,000 - $18,000 = $71,000
Retained earnings: $85,000 + $128,000 = $213,000
B.Compute the amounts that would appear on the March 31 balance sheet for accounts receivable,plant and equipment (net),and retained earnings.

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