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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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