Using the infomation provided below determine the following: A. Determine the ex
ID: 2568743 • Letter: U
Question
Using the infomation provided below determine the following:
A. Determine the expected cash collections for December **SHOW WORK**
B. Determine the cost of December merchandise purchases. **SHOW WORK**
Diltex Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: Sales are budgeted at $220,000 for November, $200,000 for December, and $210,000 for January Collections are expected to be 70% in the month of sale, 27% in the month following the sale, and 396 uncollectible The cost of goods sold is 65% of sales. The company desires to have an ending merchandise inventory at the end of each month equal to 50% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase 1 4 5 Other monthly expenses to be paid in cash are $22,500 6 Monthly depreciation is $19,000 7 lgnore taxes. Balance Sheet As of October 31 Assets Cash Accounts receivable (net of allowance for uncollectible accounts Mercchandise inventory Property, plant and equipment (net $536,000 accumulated depreciation956,000 Total assets 16,000 76,000 71,500 $ 1,119,500 Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings Total liabilities and stockholders' equity 147,000 840,000 132,500 $ 1,119,500Explanation / Answer
A.
Collection pattern = 70% in the month of sale and 27% in the month following the sale
December sales = 200,000
November sales = 220,000
The expected cash collections for December = 70% of December sales + 27% of November sales
= (200,000*70%) + (220,000*27%) = 199,400
B.
Cost of goods sold = 65% of sales
Ending inventory = 50% of the next months Cost of goods sold
(It is assumed that the ending inventory of November consists of 50% of December Cost of goods sold)
Cost of December merchandise purchases = December cost of goods sold + 50% of January cost of goods sold - 50% of December cost of goods sold
= (200,000*65%) + (210,000*65%*50%) - (200,000*65%*50%)
= 130,000 + 68,250 - 65,000 = 133,250.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.