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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 $305,000 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 $305,000 for November, $325,000 for December, and $225,000 for January.
- Collections are expected to be 65% in the month of sale and 35% in the month following the sale.
- The cost of goods sold is 80% 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 $22,600.
- Monthly depreciation is $28,500.
- Ignore taxes.
Balance Sheet October 31 | ||||||
Assets | ||||||
Cash | $ | 34,000 | ||||
Accounts receivable | 84,500 | |||||
Merchandise inventory | 170,800 | |||||
Property, plant and equipment, net of $624,000 accumulated depreciation | 920,000 | |||||
Total assets | $ | 1,209,300 | ||||
Liabilities and Stockholders' Equity | ||||||
Accounts payable | $ | 254,000 | ||||
Common stock | 755,000 | |||||
Retained earnings | 200,300 | |||||
Total liabilities and stockholders' equity | $ | 1,209,300 | ||||
The cost of December merchandise purchases would be:
Multiple Choice
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$260,000
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$126,000
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$204,000
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$244,000
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