Question

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

o Sales are budgeted at $340,000 for November, $320,000 for December, and $310,000 for January.

o Collections are expected to be 80% in the month of sale and 20% in the month following the sale.

o The cost of goods sold is 75% of sales.

o 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.

o Other monthly expenses to be paid in cash are $24,000.

o Monthly depreciation is $15,000.

o Ignore taxes.

	Balance Sheet October 31
	Assets
	Cash.............................................................................................................	$   20,000
	Accounts receivable.......................................................................................	70,000
	Merchandise inventory...................................................................................	153,000
	Property, plant and equipment, net of $572,000 accumulated depreciation........	1,094,000
	Total assets..................................................................................................	$1,337,000
	Liabilities and Stockholders' Equity
	Accounts payable..........................................................................................	$  254,000
	Common stock..............................................................................................	820,000
	Retained earnings.........................................................................................	263,000
	Total liabilities and stockholders' equity...........................................................	$1,337,000

4. Expected cash collections in December are:

A) $68,000

B) $256,000

C) $320,000

D) $324,000

5. The cost of December merchandise purchases would be:

A) $255,000

B) $139,500

C) $235,500

D) $240,000

6. December cash disbursements for merchandise purchases would be:

A) $139,500

B) $246,000

C) $240,000

D) $235,500

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

A) $54,000

B) $68,600

C) $28,200

D) $12,200

Answer 1

(4) Expected cash collections in December : $324,000(D)

(5) The cost of december merchandise purchase would be: $235,500(C)

(6)December cash disbursements for merchandise purchases would be: $246,000(B)

(7) Difference between cash receipts and disbursements would be: $54,000(A)