QUESTION 4

Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:

Sales are budgeted at $290,000 for November, $310,000 for December, and $210,000 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 $21,100. Monthly depreciation is $21,000. Ignore taxes.

Balance Sheet October 31
Assets
Cash	$	25,000
Accounts receivable		77,000
Merchandise inventory		162,400
Property, plant and equipment, net of $624,000 accumulated depreciation		1,026,000
Total assets	$	1,290,400
Liabilities and Stockholders' Equity
Accounts payable	$	239,000
Common stock		740,000
Retained earnings		311,400
Total liabilities and stockholders' equity	$	1,290,400

The difference between cash receipts and cash disbursements for December would be:

		$19,200
		$13,700
		$38,700
		$46,600