Use the following to answer questions 56-58. 56. The sales of PDC Company in Mar
ID: 1171087 • Letter: U
Question
Use the following to answer questions 56-58.
56. The sales of PDC Company in March were $92,000. The Balance sheet of PDC Company (31 March) is given below.
Current Assets:
Cash
23,000
Accounts receivable
36,800
Merchandise inventory
110,400
Unexpired insurance
4,140
Total Current Assets
174,340
Plant
Equipment, fixtures and other
85,100
Accumulated depreciation
-29,440
Net PPE
55,660
Total Assets
230,000
Current Liabilities
Accounts payable
38,640
Accrued wages and commissions payable
9,775
Loan
0
Total Current Liabilities
48,415
Owner's equity
181,585
Total equities
230,000
The projected sales in April and May are $115,000 and $184,000 respectively.
PDC sales are 60% cash and 40% credit, collected in the following month. It has no currently overdue accounts and anticipates none in the future.
The company bought a second hand truck on 1 April 2008: $6,900
Miscellaneous cash expenses: 5% of the current sales
Rent: $4,600/month
Insurance expense: paid once a year (beginning of January) = $5,520;
Depreciation expense: $1,150/month (including for the truck)
Tax rate: 0%
Wages: $5750/month + 15% commission of sales/month
Wages are paid twice a month and paid a half month after they are earned.
The inventory policy of the company is to begin a month with a sufficient inventory to cover 80% of sales + $46,000 cushion
Cost of Goods Sold: 70% of sales
Purchases are made on account with net 15-day credit terms (50% of the purchases made in a specific month are paid in that month, the other 50% of a month’s purchases are paid the following month).
PDC borrowed from one of its founder at 1.5% interest/month for the next 2 years. PDC borrows from and repays the founder at the end of the month. The agreement with this founder stipulates a $23,000 minimum cash balance in the venture’s checking account.
The ending inventory in April is
(a) $123,280
(b) $149,040
(c) $110,400
(d) $193,200
(e) $138,000
57. Accounts payable in April is
(a) $38,640.
(b) $41,860.
(c) $59,570.
(d) $51,520.
(e) None of the above.
58. Total purchases of raw materials in April is
(a)$77,280
(b)$103,040
€$67,620
(d)$83,720
€None of the above
can you show mw in step by step
Current Assets:
Cash
23,000
Accounts receivable
36,800
Merchandise inventory
110,400
Unexpired insurance
4,140
Total Current Assets
174,340
Plant
Equipment, fixtures and other
85,100
Accumulated depreciation
-29,440
Net PPE
55,660
Total Assets
230,000
Current Liabilities
Accounts payable
38,640
Accrued wages and commissions payable
9,775
Loan
0
Total Current Liabilities
48,415
Owner's equity
181,585
Total equities
230,000
Explanation / Answer
The ending inventory in April is
The inventory policy of the company is to begin a month with a sufficient inventory to cover 80% of sales + $46,000 cushion
Beginning Inventory of May is the ending inventory in April
Beginning Inventory of May
May sales =184000
Cost of Goods sold May =184000*70% =$128800
Hence Beginning Inventory of May =128800*80%+46000 =$149040
Accounts payable in April is
Total purchases of raw materials in April is
€None of the above
Cost of goods Sold 115000*.70 80500 Add Ending Inventory 149040 Less Beginning Inventory (115000*.70*.80+46000) 110400 Total Purchase 119140 Hence Account Payable 119140/2 59570Related Questions
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