Question

Herald company, a jacket selling company, prepares its master budget for the year 2020 on a quarterly basis. The budget officer has gathered the following data:

1. Estimated Sales for each quarter is $230,000. All sales are on credit and all sales are collected in the following quarter.

2. Cost of goods sold for each quarter is $100,000.

3. Variable selling and administrative expenses for each jacket are 10% sales commission.

4. Fixed selling and administrative (S&A) expenses for the year are:

Advertising	$60,000
Executive salaries	$110,000
Insurance	$40,000
Depreciation	$20,000
Total fixed S&A expenses	$230,000

5. The company expects to borrow $80,000 on April, 1, 2020. No principal will be repaid during the year; Interest rate at an annual rate of 10% is due quarterly.

6. The company will declare $3,000 dividend in December 2020, which will be paid in January 2021.

How much is the net income for the year 2020?

Answer 1