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Can someone explain why the ending inventory is multiplied by 0.4? And can someone also explain why the accounts payable value of 53,760 is automatically
Can someone explain why the ending inventory is multiplied by 0.4? And can someone also explain why the accounts payable value of 53,760 is automatically assumed to be a purchase from last month, isn't that a shot in the dark in the event that you have other accounts payable?
Kirkland Inc. began operations in August 1, 2013. The information below is for Kirkland Inc.'s operations for the four months from August 1 , to November 30 , of 2013. c. Sales are 25% for cash and 75% on credit. All credit sales are collected in the month following the sale. There are no bad debts. d. The gross margin percentage is 60% of sales. The desired ending inventory is equal to 20% of the following month's sales. One fifth of the purchases are paid for in the month of purchase and the rest is purchased on account and paid in full the following month. e. The monthly cash operating expenses are $80,000, including the monthly depreciation expense of $7,000. f. During September, Kirkland Company will purchase new office equipment for $17,000 cash. g. Dividends of $13,500 were declared and paid in September. h. The company must maintain a minimum cash balance of $25,000. A line of credit is used to maintain this balance. Borrowing will be made in increments of $1,000. All borrowing is done at the beginning of the month and repayments are made at the end of the month. The annual interest rate is 12%, paid when the loan is repaid (ignore accrual of interest in financial statements) Instructions: 1. Prepare Kirkland Inc.'s cash budget for the month of September, (9 Marks) 3. Prepare Kirkland Inc.'s balance sheet at the end of September. (7.5 Marks)Step by Step Solution
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