*** PLEASE DO NOT COPY & PASTE THE ANSWER FROM A SIMILIAR OR EXACT PREVIOUSLY AS
ID: 2445738 • Letter: #
Question
*** PLEASE DO NOT COPY & PASTE THE ANSWER FROM A SIMILIAR OR EXACT PREVIOUSLY ASKED QUESTION. THE ANSWERS I HAVE INDICATED BELOW ARE THE 100% CORRECT ANSWERS. IF YOUR CALCULATIONS DO NOT ADD UP TO THOSE ANSWERS PLEASE DO NOT POST YOUR ANSWER. ****
Miles Hardware sells fasteners and general building supplies to building contractors in a medium-sized town in Montana. Data regarding the store's operations in 2014 is collected as below:
Sales are budgeted at:
November: $380,000
December: $390,000
January: $400,000
The following cash collection schedule is used:
The month of sale: 70%
Next month: 27%
Uncollectible: 3%
Cost of goods sold: 65% of sales
Desired ending inventory equals to: 80% of the following month's cost of goods sold
Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash: $22,000
Monthly depreciation: $20,000
Miles declares a dividend payable on Dec 15 of: $12,000 (paid on Jan.15, 2015)
Ignore taxes.
Balance Sheet on October 31
Assets
Liabilities and Stockholder's Equity
1) Retained earnings at December 31 will be:
A. $244,000
B. $354,200
C. $405,000
D. $410,000 (Correct Answer)
E. $422,000
2) The cash balance at the end of December would be:
A. $13,000
B. $114,400
C. $197,400 (Correct Answer)
D. $120,400
E. None of the above
*** Please show the work necessary to attain the two correct answers. ***
Cash $15,000 Accounts Receivable (net of allowance) $77,000 Inventory $197,600 Property, plant and equipment (net) $992,000 Total Assets $1,281,600Explanation / Answer
(1) Computation of retained earning for the month of Dec. 31.We have,
Step1: Computation of Net profit for the month of November and December.We have,
Step2: Computation of accumulated retained earning as on December 31.We have,
Retained earning as on December 31 = Opening balance of retained earning + Net profit of November + Net profit of December
Retained earning as on December 31 = $ 259,600 + 79,600 + 70,800 = $ 410,000
Answer: (D) $ 410,000
(2) Computation of cash balance as on December 31.We have,
Note: Purchases for November = Cost of good sold for December + Ending inventory - Begenning inventory
Purchases for November = ( 380,000 x 0.65) + ( 390,000 x 65% x 80 %) - 197,600
Purchases for November = 247,000 + 202,800 - 197,600 = $ 252,200
Since, the payment of purchases is made in the following month.So, Payment of purchases of December is $ 252,200
Hence, the cash balance at the end of December would be $ 197,400
Answer:(C) $ 197,400
Particulars November December Sales $ 380,000 $ 390,000 Less: Cost of Good Sold 380,000 x 65% 247,000 390,000 x 65 % 253,500 Less: Depreciation 20,000 20,000 Less: Monthley expenses 22,000 22,000 Less: Bad Debt 380,000 x 3 % 11,400 390,000 x 3 % 11,700 Net profit 79,600 82,800 Less: Provision for dividend 0 12,000 Amount transfer to retained earnings $ 79,600 $ 70,800Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.