Brarin Corporation is a small wholesaler of gourmet food products. Data regardin
ID: 2565007 • Letter: B
Question
Brarin Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow:
Sales are budgeted at $360,000 for November, $380,000 for December, and $380,000 for January.
Collections are expected to be 75% in the month of sale, 24% in the month following the sale, and 1% uncollectible.
The company would like to maintain ending merchandise inventories equal to 75% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase.
$1,517,500
$1,517,500
December cash disbursements for merchandise purchases would be:
Brarin Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow:
Explanation / Answer
Answer:
December cash disbursements for merchandise purchases would be: $278,250
Working notes for the above answer is as under
Merchandise Purchases Budget
November
December
Sales
360,000
380,000
Cost of goods sold (85% of sales)
306000
323000
Add:
ending inventory (75% of next month COGS)
242250
242250
Less: Beginning inventory
(75% of current month COGS)
270000
285000
net purchase required
278250
280250
In the month of December company will pay the November month's purchase because in the question it was given that Payment for merchandise is made in the month following the purchase.
So December cash disbursements for merchandise purchases would be: $278,250
Merchandise Purchases Budget
November
December
Sales
360,000
380,000
Cost of goods sold (85% of sales)
306000
323000
Add:
ending inventory (75% of next month COGS)
242250
242250
Less: Beginning inventory
(75% of current month COGS)
270000
285000
net purchase required
278250
280250
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