Carver Lumber sells lumber and general building supplies to building contractors

Question

Carver Lumber sells lumber and general building supplies to building contractors in a medium-sized town in Montana. Data regarding the store's operations follow: 12 .Sales are budgeted at $350,000 for November, $320,000 for December, and $300,000 for January. Collections are expected to be 90% in the month of sale and 10% in the month following the sale * The cost of goods sold is 75% of sales. * The company desires to have an ending merchandise inventory equal to 60% of the following month's cost of goods sold. Payment for merchandise is made in the month Skipped following the purchase Other monthly expenses to be paid in cash are $24,700. Monthly depreciation is $16,000 .Ignore taxes. Balance Sheet October 31 Assets Cash Accounts receivable Inventory Property, plant and equipment, net of $ 19,000 77,000 157,500 1,002,000 $502,000 accumulated depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings Total liabilities and stockholders equity $1,255,500 s 272,000 780,000 203,500 $1,255,500 The cash balance at the end of December would be:

Explanation / Answer

Aswer is $ 163600 Explanantion: Cash received on account of Sales: Accounts receivable of Octs 77000 November of sales 350000 90% of December sales 288000 Total cash collections 715000 Cash paiid for cost of goods sold: Nov Dec Sales 350000 320000 COGS @75% 262500 240000 Add: ending inventry 144000 135,000 Total production needs 406500 375000 Less: Beginning balance 157500 144000 Purchases 249000 231000 Expected cash disbursals in Quarter: Accounts payable 272,000 Add: Nov purchases 249000 Total disbursement 521000 Cash balance in DEc31 Oct 31 balance 19000 Add: cashh receipts 715000 Less: payments: Cash disbursals 521000 Payment of other expense 49400 Cash ending balance 163600

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