Question
Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: Sales are budgeted at $248,000 for
Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:
Sales are budgeted at $248,000 for November, $268,000 for December, and $220,000 for January.
Collections are expected to be 60% in the month of sale and 40% in the month following the sale.
The cost of goods sold is 75% of sales.
The company desires to have an ending merchandise inventory at the end of each month equal to 70% 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 $17,500.
Monthly depreciation is $20,000.
Ignore taxes.
Balance Sheet October 31 | ||||||
Assets |
|
| ||||
Cash | $ | 20,000 | ||||
Accounts receivable |
| 79,500 | ||||
Merchandise inventory |
| 130,200 | ||||
Property, plant and equipment, net of $624,000 accumulated depreciation |
| 976,000 | ||||
Total assets | $ | 1,205,700 | ||||
|
|
| ||||
Liabilities and Stockholders' Equity |
|
| ||||
Accounts payable | $ | 244,000 | ||||
Common stock |
| 745,000 | ||||
Retained earnings |
| 216,700 | ||||
Total liabilities and stockholders' equity | $ | 1,205,700 | ||||
Retained earnings at the end of December would be:
Multiple Choice
$267,700
$275,700
$274,700
$270,700
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