Question
Brarin Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow: Sales are budgeted at $430,000 for November, $450,000 for
Brarin Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow: |
Sales are budgeted at $430,000 for November, $450,000 for December, and $450,000 for January. | |
Collections are expected to be 85% in the month of sale, 14% in the month following the sale, and 1% uncollectible. | |
The cost of goods sold is 85% of sales. | |
The company would like to maintain ending merchandise inventories equal to 75% 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 $22,700. | |
Monthly depreciation is $19,900. | |
Ignore taxes. |
Balance Sheet | |
October 31 | |
Assets | |
Cash | $37,000 |
Accounts receivable, net of allowance for uncollectible accounts | 85,000 |
Merchandise inventory | 274,125 |
Property, plant and equipment, net of $613,000 accumulated depreciation | 1,215,000 |
Total assets | $1,611,125 |
Liabilities and Stockholders' Equity | |
Accounts payable | $317,625 |
Common stock | 930,000 |
Retained earnings | 363,500 |
Total liabilities and stockholders' equity | $1,611,125 |
Expected cash collections in December are:
$450,000
$442,700
$382,500
$60,200
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