Justin's Plant Store, a Retailer, Started Operations on January 1

question 135

Multiple Choice

Justin's Plant Store, a retailer, started operations on January 1. On that date, the only assets were $16,000 in cash and $3,500 in merchandise inventory. For purposes of budget preparation, assume that the company's cost of goods sold is 60% of sales. Expected sales for the first four months appear below: $\begin{array} { |l | r | } \hline & \text { Expected Sales } \\\hline \text { January } & \$ 10,000 \\\hline \text { February } & 24,000 \\\hline \text { March } & 16,000 \\\hline \text { April } & 25,000 \\\hline\end{array}$ The company desires that the merchandise inventory on hand at the end of each month be equal to 50% of the next month's merchandise sales (stated at cost) . All purchases of merchandise inventory must be paid in the month of purchase. Sixty percent of all sales should be for cash; the balance will be on credit. Seventy-five percent of the credit sales should be collected in the month following the month of sale, with the balance collected in the following month. Variable operating expenses should be 10% of sales, and fixed expenses (all depreciation) should be $3,000 per month. Cash payments for the variable operating expenses are made during the month the expenses are incurred.
-In a budgeted income statement for the month of February,what would be the net income?

• A) $0.
• B) $1,800.
• C) $4,200.
• D) $9,000.

Determine the presentation order of activities on the Statement of Cash Flows.

Understand the reporting of cash dividends and their classification in the Statement of Cash Flows.

Understand the concept of cash flows from operating, investing, and financing activities.

Learn the indirect method for calculating net cash flow from operating activities.

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Definitions:

Metabolic Acidosis

A condition where there is too much acid in the body fluids, often due to kidney failure or excessive acid production.

Renal Insufficiency

A medical condition where the kidneys fail to adequately filter waste products from the blood.

ABG Analysis

A medical test that measures the levels of oxygen, carbon dioxide, and blood pH to assess lung function and gas exchange efficiency.

Bicarbonate

A chemical compound that acts as a buffer in the blood to help maintain the body's pH balance.