Dilly Farm Supply is located in a small town in the rural west. Data regarding t
ID: 2577856 • Letter: D
Question
Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: Sales are budgeted at $290,000 for November, $310,000 for December, and $210,000 for January. Collections are expected to be 65% in the month of sale and 35% in the month following the sale. The cost of goods sold is 80% of sales. The company desires to have an ending merchandise inventory at the end of each month equal to 70% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase. Other monthly expenses to be paid in cash are $21,100. Monthly depreciation is $21,000. .Ignore taxes Balance Sheet October 31 Assets Cash Accounts receivable Merchandise inventory Property, plant and equipment, net of $624,000 accumulated depreciation Total assets $ 25,000 77,000 162,400 1,026,000 $1,290,400 Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings $ 239,000 740,000 311,400 $1,290,400 Total liabilities and stockholdersequity The difference between cash receipts and cash disbursements for December would be:Explanation / Answer
CASH RECEIPTS:
November Sales = $290,000
December Sales = $310,000
Cash Receipts = 35% * November Sales + 65% * December Sales
Cash Receipts = 35% * $290,000 + 65% * $310,000
Cash Receipts = $303,000
CASH DISBURSEMENTS:
November Sales = $290,000
December Sales = $310,000
November Cost of Goods Sold = 80% * November Sales
November Cost of Goods Sold = 80% * $290,000
November Cost of Goods Sold = $232,000
December Cost of Goods Sold = 80% * December Sales
December Cost of Goods Sold = 80% * $310,000
December Cost of Goods Sold = $248,000
November Beginning Inventory = $162,400
November Ending Inventory = 70% * December Cost of Goods Sold
November Ending Inventory = 70% * $248,000
November Ending Inventory = $173,600
November Inventory Purchases = November Cost of Goods Sold + November Ending Inventory - November Beginning Inventory
November Inventory Purchases = $232,000 + $173,600 - $162,400
November Inventory Purchases = $243,200
Cash Disbursement in December = November Inventory Purchases + Other Monthly Expenses
Cash Disbursement in December = $243,200 + $21,100
Cash Disbursement in December = $264,300
Difference between Cash receipts and cash disbursements = $303,000 - $264,300
Difference between Cash receipts and cash disbursements = $38,700
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