Item7

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Item 7

Information pertaining to Collection Corporation's sales revenue is presented below:

	November	December	January
Cash sales	$ 103,000	$ 132,000	$ 85,000
Credit sales	295,000	457,000	241,000
Total sales	$ 398,000	$ 589,000	$ 326,000

Management estimates that 4% of credit sales are eventually uncollectible. Of the collectible credit sales, 65% are likely to be collected in the month of sale and the remainder in the month following the month of sale. The company desires to begin each month with an inventory equal to 75% of the sales projected for the month. All purchases of inventory are on open account; 30% will be paid in the month of purchase, and the remainder paid in the month following the month of purchase. Purchase costs are approximately 60% of the selling prices. Budgeted January cash payments for December inventory purchases by Collection Corporation are: