Carpon Lumber sells lumber and general building supplies to building contractors
ID: 2449623 • Letter: C
Question
Carpon Lumber sells lumber and general building supplies to building contractors in a medium-sized town in Montana. Data regarding the store's operations follow:
• Sales are budgeted at $440,000 for November, $450,000 for December, and $470,000 for January
• Collections are expected to be 69% in the month of sale, 30% in the month following the sale, and 1% uncollectible.
• The cost of goods sold is 70% of sales.
• The company desires to have an ending merchandise inventory equal to 60% 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 $26,100.
• Monthly depreciation is $18,500.
• Ignore taxes.
1,148,000
$1,433,800
689,800
$1,433,800
Accounts payable at the end of December would be:
$323,400
$315,000
$197,400
$140,000
Statement of Financial PositionOctober 31 Assets Cash $21,000 Accounts receivable (net of allowance for uncollectible accounts) 80,000 Inventory 184,800 Property, plant and equipment (net of $608,000 accumulated depreciation)
1,148,000
Total assets$1,433,800
Explanation / Answer
Calculation of Accounts Payable at the end of December for Carpon Lumber Actual Budgeted Base October November December January A Budgeted sales Given $ 4,40,000 $ 4,50,000 $ 4,70,000 B cost of goods sold (CGS) 70 % of sales $ 3,08,000 $ 3,15,000 $ 3,29,000 C Closing Inventory 60 % of next months CGS $ 1,84,800 $ 1,89,000 $ 1,97,400 $ - D Opening Inventory Closing inventory of previous month $ 1,84,800 $ 1,89,000 $ 1,97,400 E Purchases CGS+Closing Inventory-opening Inventory (B+C-D) $ 3,12,200 $ 3,23,400 F Accounts payable Respective months Purchases (paid on next month) $ 3,12,200 $ 3,23,400 Answer Accounts payable at the end of December = $ 323,400