Question
#1. Brarin Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow: Sales are budgeted at $450,000 for November, $460,000
#1.
Brarin Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow: |
Sales are budgeted at $450,000 for November, $460,000 for December, and $460,000 for January. | |
Collections are expected to be 80% in the month of sale, 18% in the month following the sale, and 2% uncollectible. | |
The cost of goods sold is 55% of sales. | |
The company would like to maintain ending merchandise inventories equal to 45% of the next 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 are $20,500. | |
Monthly depreciation is $17,700. | |
Ignore taxes. |
Balance Sheet | |
October 31 | |
Assets | |
Cash | $53,000 |
Accounts receivable, net of allowance for uncollectible accounts | 101,000 |
Merchandise inventory | 111,375 |
Property, plant and equipment, net of $629,000 accumulated depreciation | 1,295,000 |
Total assets | $1,560,375 |
Liabilities and Stockholders' Equity | |
Accounts payable | $286,875 |
Common stock | 890,000 |
Retained earnings | 383,500 |
Total liabilities and stockholders' equity | $1,560,375 |
The cost of December merchandise purchases would be:
A. $101,000
B. $113,850
C. $53,000
D. $253,000
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