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Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: Sales are budgeted at $251,000 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 $251,000 for November, $291,000 for December, and $218,000 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 90% 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 $20,000.
- Monthly depreciation is $25,000.
- Ignore taxes.
Balance Sheet | |
October 31 | |
Assets | |
---|---|
Cash | $ 26,000 |
Accounts receivable | 81,000 |
Merchandise inventory | 257,400 |
Property, plant and equipment, net of $624,000 accumulated depreciation | 946,000 |
Total assets | $ 1,310,400 |
Liabilities and Stockholders' Equity | |
Accounts payable | $ 247,000 |
Common stock | 748,000 |
Retained earnings | 315,400 |
Total liabilities and stockholders' equity | $ 1,310,400 |
Expected cash collections in December are:
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