Use the following information to answer Questions 3 and 4. A company has estimat

Question

Use the following information to answer Questions 3 and 4. A company has estimated its activity for January 20X5. Selected data from these estimated amounts are as follows SELECTED ESTIMATED DATA FOR JANUARY 20X5 Sales (all on credit) Gross profit percentage on sales Increase in trade accounts receivable during month $ Decrease in accounts payable during month 500,000 30% 20,000 (all for purchases of inventory for resale) Increase in inventory during month Total selling, general and administrative expenses 5,000 10,000 100,000 Total selling, general and administrative expenses include a charge for uncollectible accounts of 2% of sales. The fixed portion of selling, general, and administrative expenses is S42,000 per month, which includes depreciation expense of $12,000. Al cash selling, general, and administrative expenses are paid for in the month in which they are incurred. All inventory purchases are on credit. What are the estimated cash receipts from operations for January? (a) $500,000. (b) $480,000 (c) $520,000 (d) $525,000. 3. What are the estimated cash disbursements for operations for January? (a) $465,000. (b) $443,000. (c) $428,000. (d) S365,000

Explanation / Answer

3) Cash receipts = c) $520000 $ Credit sales 500000 (-) increase in trade receivable during the month 20000 Total cash receipts from operations for January 520000 4) Cash Disbursements = d. $365000 $ Cost of goods sold (500000*70%) 350000 (+) increase in inventory 10000 purchases (Credit) 360000 (+) decrease in accounts payable during the month 5000 Total cash disbursements from operations for January 365000

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