Information pertaining to Yekstop Corp.\'s sales revenue is presented below: Man
ID: 2567346 • Letter: I
Question
Information pertaining to Yekstop Corp.'s sales revenue is presented below:
Management estimates that 4% of credit sales are eventually uncollectible. Of the collectible credit sales, 65% are likely to be collected in the month of sale and the remainder in the month following the month of sale. The company desires to begin each month with an inventory equal to 75% of the sales projected for the month. All purchases of inventory are on open account; 30% will be paid in the month of purchase, and the remainder paid in the month following the month of purchase. Purchase costs are approximately 60% of the selling prices.
Budgeted January cash payments for December inventory purchases by Yekstop Corp. are:
$241,500.
$67,995.
$103,500.
$158,655.
$289,440.
May I please receive a step-by-step walkthrough of this problem.
November December January Cash sales $96,000 $125,000 $78,000 Credit sales 288,000 450,000 234,000 Total sales $384,000 $575,000 $312,000Explanation / Answer
d.$158,655.
First let us know the amount of purchases to be made in december.
purchases are 60% of selling price.
=> amount of purchases to be made in december = 60% * (total sales + closing stock - opening stock).
here,
closing stock = 75% of January sales =>75%*312,000=>$234,000
opening stock =>75% of december sales =>75% * 575,000=>$431,250.
now,
amount of purchases to be made in december = 60% *($575,000 + 234,000 - 431,250)
=>60%*$377,750
=>$226,650.
now,
out of this total purchases of $226,650, 70% will be paid in january
=>70%*226,650
=>$158,655.