The Following Information Relates to DFW Corporation for the Year

question 62

Essay

The following information relates to DFW Corporation for the year ended March 31, 2012:
▪ 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:
A. Prepare a budgeted income statement that summarizes activity for the two months ended March 31, 2012.
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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Definitions:

Evolutionary-developed

Pertains to characteristics, systems, or processes that have evolved over time through natural selection and adaptation.

Heuristics

Mental shortcuts or rules of thumb that ease the cognitive load of making a decision.

Decision Making

The process of identifying and choosing alternatives based on the values and preferences of the decision-maker.

Shelf-space

The amount of area or space available on shelves in a store allocated to display products.