Bramble Corporation is a small wholesaler of gourmet food products. Data regardi

Question

Bramble Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow:

Sales are budgeted at $420,000 for November, $400,000 for December, and $390,000 for January.

Collections are expected to be 55% in the month of sale and 45% in the month following the sale.

The cost of goods sold is 70% of sales.

Multiple Choice

$294,000

$163,800

$275,800

$280,000

The company would like maintain ending merchandise inventories 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 $24,800.

Monthly depreciation is $15,800.

Ignore taxes.

The cost of December merchandise purchases would be:

Balance Sheet
October 31 Assets Cash $ 20,800 Accounts receivable 70,800 Merchandise inventory 176,400 Property, plant and equipment, net of $572,800 accumulated depreciation 1,094,800 Total assets $ 1,362,800 Liabilities and Stockholders' Equity Accounts payable $ 254,800 Common stock 820,800 Retained earnings 287,200 Total liabilities and stockholders' equity $ 1,362,800

Explanation / Answer

Cost of December merchandise purchases =(400000*70%)+(390000*70%*60%)-(400000*70%*60%)= $275800

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