Question

Information pertaining to Yekstop Corp.'s sales revenue is presented below:

	November				December				January
Cash sales	$	98,000			$	127,000			$	80,000
Credit sales		290,000				452,000				236,000
Total sales	$	388,000			$	579,000			$	316,000

Management estimates that 5% 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 70% 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 cash payments in December for November inventory purchases by Yekstop Corp. are:

• $72,454.

• $93,906.

• $116,400.

• $162,960.

• $219,114.

Brownsville Novelty Store prepared the following budget information for the month of May:

• Sales are budgeted at $385,000. All sales are on account and a provision for bad debts is made for each month at three percent of sales for the month.
• Inventory was $103,000 on April 30; an inventory increase of $17,000 is planned for May 31.
• All inventory is marked to sell at cost plus 40 percent.
• Estimated cash disbursements for selling and administrative expenses for the month are $67,000.
• Depreciation for May is projected at $7,900.

Brownsville's budgeted cost of goods sold (CGS) in May is:

Multiple Choice

• $110,000.

• $154,000.

• $221,900.

• $292,000.

• $275,000.

Answer 1

Thank you for your patience. Please give positive ratings so I can keep answering. It would help me a lot. Please comment if you have any query. Thanks!

Yekstop Corp.
Purchases Budget	November	Note
Total sales	388,000.00	A
Purchases @ 60%	232,800.00	B=A*60%
Purchases Budget	232,800.00	See B
Purchase cost of November	232,800.00	See B
30% paid in November	69,840.00	C=B*30%
70% paid in December	162,960.00	D=B*70%
Answer is option D.
Brownsville Novelty Store	Amount $	Note
Sales	385,000.00	E
Markup on cost	40%	F
Cost of goods sold	275,000.00	G=E/(1+F)
Answer is option E.