Retained earnings at the end of December would be: $338,100 The cost of December

Question

Retained earnings at the end of December would be:

$338,100

The cost of December merchandise purchases would be:

December cash disbursements for merchandise purchases would be:

Don't just give me the answer. Elaboration for highest rate! thanks

 

 

$342,000 $362,600 $337,800

$338,100

Dilom Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January. Collections are expected to be 55% in the month of sale, 40% in the month following the sale, and 5% uncollectible. The cost of goods sold is 80% of sales. The company purchases 50% of its merchandise in the month prior to the month of sale and 50% in the month of sale. Payment for merchandise is made in the month following the purchase. Other monthly expenses to be paid in cash are $21,700. Monthly depreciation is $17,000. Ignore taxes. Retained earnings at the end of December would be: $342,000 $362,600 $337,800 $338,100 The cost of December merchandise purchases would be: $176,000 $208,000 $184,000 $84,000 December cash disbursements for merchandise purchases would be: $184,000 $196,000 $176,000 $84,000

Explanation / Answer

Retained earnings at the end of December would be: Nov Dec Sales 260,000 230,000 Cost of goods sold (80%) 208,000 184,000 Gross Profit 52,000 46,000 Monthly Expense & Dep 38,700 38,700 Net income 13,300 7,300 Total 20,600 Less Uncollectible 24,500 Net Loss 3,900 Beginning Balance 342,000 Less: Net Loss 3,900 Ending Balance 338,100 $342,000 $362,600 $337,800 $338,100 The cost of December merchandise purchases would be: Dec Jan Sales 230,000 210,000 Cost of goods sold (80%) 184,000 168,000 50% of the COGS 92,000 84,000 Total of 50% of COGS 176,000 (92,000 +84,000 $176,000 $208,000 $184,000 $84,000 December cash disbursements for merchandise purchases would be: Nov Dec Sales 260,000 230,000 Cost of goods sold (80%) 208,000 184,000 50% of the COGS 104,000 92,000 Total of 50% of COGS 196,000 (104,000 + 92,000) $184,000 $196,000 $176,000 $84,000

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