The Richburn Manufacturing Company increased its merchandise inventory by $21,00

Question

The Richburn Manufacturing Company increased its merchandise inventory by $21,000 over the year. The company also granted its customers more liberal credit terms which increased the accounts receivable by $41,500. Sales were $979,000 and the accounts payable decreased by $31,500. The gross profit on sales is 45%. Marketing and administrative expenses were $149,000; this included depreciation expense of $8,000. What were the cash disbursements for the year?

Explanation / Answer

The Richburn Manufacturing Company increased its merchandise inventory by $21,000 over the year. The company also granted its customers more liberal credit terms which increased the accounts receivable by $41,500. Sales were $979,000 and the accounts payable decreased by $31,500. The gross profit on sales is 45%. Marketing and administrative expenses were $149,000; this included depreciation expense of $8,000. What were the cash disbursements for the year?

COGS: $979,000 (1 - .45) = $538450

inventory purchases = COGS + increase in inventory = $538450 + $21,000 = $559 450

cash paid on payables = purchases + decrease in payables = $559 450 + $31,500 = $590950

; cash disbursements = cash paid on payables + cash paid for expenses = $590950+ ($149,000 - $8,000) = 731 950

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