Question

The following data have been taken from the budget reports of Brandon company, a merchandising

company.
Forty percent of purchases are paid for in cash at the time of purchase, and 30% are paid for in each of
the next two months. Purchases for the previous November and December were $150,000 per month.
Employee wages are 10% of sales for the month in which the sales occur. Selling and administrative
expenses are 20% of the following month's sales. (July sales are budgeted to be $220,000.) Interest
payments of $20,000 are paid quarterly in January and April. Brandon's cash disbursements for the month
of April would be:
A. $140,000
B. $254,000
C. $200,000
D. $248,000

Answer 1

With the information given, Brandon company's cash disbursements for the month of April are partially calculated: $45,000 for purchases made in previous months and a $20,000 quarterly interest payment, totaling $65,000. However, the full amount cannot be determined without the monthly sales data for April and May.

Step-by-step explanation:

To calculate Brandon company's cash disbursements for the month of April, we'll consider several expenses: purchases, employee wages, and selling/administrative expenses, along with the quarter interest payment which falls in April.

Purchases: Previous months' purchases (November and December) were $150,000 each, and since 30% is paid in the second month after purchase, the amount due in April would be 30% of December's purchases: $150,000 * 30% = $45,000.

Employee wages: Wages are 10% of sales for the same month. For April, we'll need the sales figure to calculate this, which is not provided. Therefore, we can't calculate this figure with the information given.

Selling and administrative expenses: These are 20% of the following month's sales, which means they are based on May's sales. Since May's sales figure is not provided, we cannot calculate this expense for April either.

Interest payment: As these are paid quarterly in January and April, the interest payment for April is $20,000.

Since we only have the purchases and interest payment figures, we can sum these to find a partial total for April's cash disbursements: $45,000 (purchases) + $20,000 (interest payment) = $65,000. However, without the sales figures for April and May, we cannot determine the full amount of the disbursements. Thus, with the given data, we do not have enough information to choose from the provided options (A, B, C, D).