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 $303,000 for November, $323,000 for December, and $223,000 for January.Collections are expected to be 70% in the month of sale and 30% in the month following the sale.The cost of goods sold is 75% of sales.The company desires to have an ending merchandise inventory at the end of each month equal to 80% 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 $22,400.Monthly depreciation is $27,500.Ignore taxes.Balance SheetOctober 31Assets Cash $ 33,000Accounts receivable 83,500Merchandise inventory 181,800Property, plant and equipment, net of $624,000 accumulated depreciation 918,000Total assets $ 1,216,300Liabilities and Stockholders' Equity Accounts payable $ 252,000Common stock 753,000Retained earnings 211,300Total liabilities and stockholders' equity $ 1,216,300The cost of December merchandise purchases would be: _______.

Answer 1

$263,000

Step-by-step explanation:

November December January

budgeted sales 303,000 323,000 223,000

collections 212,100 226,100 156,100

90,900 96,900

cost of goods sold 227,250 242,250 167,250

ending inventory 193,800 133,800

payment for merchandise 227,250 242,250

other monthly exp. 22,400 22,400 22,400

depreciation 27,500 27,500 27,500

The cost of December merchandise purchases would be:

total budgeted sales $323,000

+ desired ending inventory $133,800

total merchandise needed $456,800

- beginning inventory ($193,800)

total budgeted purchases $263,000