Super Drive is a computer hard-drive manufacturer. The company\'s balance sheet

Question

Super Drive is a computer hard-drive manufacturer. The company's balance sheet for the fiscal year ended on November 30 appears below:

Super Drive, Inc.
Statement of Financial Position
For the year ended November 30
Assets:
Cash $52,000
Accounts receivable 150,000
Inventory 315,000
Property, plant, and equipment 1,000,000
Total Assets $1,517,000
Liabilities and stockholders' equity:
Accounts payable $175,000
Common stock 900,000
Retained earnings 442,000
Total liabilities and
stockholders' equity $1,517,000

Additional information regarding Super Drive's operations appears below:

• Sales are budgeted at $520,000 for December and $500,000 for January.
• Collections are expected to be 60% in the month of sale and 40% in the month following sale. There are no bad debts.
• 80% of the disk-drive components are purchased in the month prior to the month of the sale, and 20% are purchased in the month of the sale. Purchased components comprise 40% of the cost of goods sold.
• Payment for components purchased is made in the month following the purchase.
• Assume that the cost of goods sold is 80% of sales.

The budgeted cash collections for the upcoming December should be


A. $462,000.

B. $520,000.

C. $402,000.

D. $208,000.

Explanation / Answer

Cash collections are expected to be 60% in the month of sale and 40% in the following month of sale. Sale in the month of December is $520,000. Collections in the month of December = 60% ($520,000)                                                            = $312,000 From the November balance sheet, Accounts receivable balance is $150,000 This balance shows the portion of the 40% collections amount that needs to be collected in the month of December for November sales. Total collection made in December = Collection in the month of December + 40% collections in the month of November                                                       = $312,000 + $150,000                                                       = $462,000 Therefore, the correct option is a)$462,000    

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.