Question
Miles Hardware sells fasteners and general building supplies to building contractors in a medium-sized town in Montana. Data regarding the store's operations in 2014 is
Miles Hardware sells fasteners and general building supplies to building contractors in a medium-sized town in Montana. Data regarding the store's operations in 2014 is collected as below:
Sales are budgeted at: November: $380,000 December: $390,000 January: $400,000
The following cash collection schedule is used:
The month of sale: 70% Next month: 27% Uncollectible: 3% Cost of goods sold: 65% of sales Desired ending inventory equals to: 80% of the following 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: $22,000 Monthly depreciation: $20,000 Miles declares a dividend payable on Dec 15 of: $12,000 (paid on Jan.15, 2015) Ignore taxes.
Balance Sheet on October 31 Assets
Cash | $15,000 |
Accounts Receivable (net of allowance) | $77,000 |
Inventory | $197,600 |
Property, plant and equipment (net) | $992,000 |
Total Assets | $1,281,600 |
Liabilities and Stockholder's Equity
Accounts Payable | $240,000 |
Common Stock | $780,000 |
Retained Earnings | $259,600 |
Total Liabilities and Stockholders Equity | $1,279,600 |
1) Retained earnings at December 31 will be:
A. $244,000
B. $354,200
C. $405,000
D. $410,000 (Correct Answer)
E. $422,000
2) The cash balance at the end of December would be:
A. $13,000
B. $114,400
C. $197,400 (Correct Answer)
D. $120,400
E. None of the above
*** Please show the work necessary to attain the two correct answers. ***
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