Question

TB MC Qu. 8-120 Bramble Corporation is a small wholesaler ...

Bramble Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow:

• Sales are budgeted at $300,000 for November, $280,000 for December, and $270,000 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 70% of sales.
• The company would like to maintain ending merchandise inventories equal to 60% 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 $23,600.
• Monthly depreciation is $14,600.
• Ignore taxes.

Balance Sheet October 31
Assets
Cash	$	21,600
Accounts receivable		71,600
Merchandise inventory		126,000
Property, plant and equipment, net of $573,600 accumulated depreciation		1,095,600
Total assets	$	1,314,800
Liabilities and Stockholders' Equity
Accounts payable	$	255,600
Common stock		821,600
Retained earnings		237,600
Total liabilities and stockholders' equity	$	1,314,800

December cash disbursements for merchandise purchases would be:

Multiple Choice

• $196,000

• $191,800

• $201,600

• $113,400

Answer 1

	November	December	January
Sales	$        300,000	$        280,000	$      270,000
COGS at 70%	$        210,000	$        196,000	$      189,000
Add: Desired ending inventory	$        117,600	$        113,400
Total inventory needed	$        327,600	$        309,400
Less: Beginning inventory	$        126,000	$        117,600
Purchases required	$        201,600	$        191,800
Payment for purchases		$        201,600