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Dilly Farm Supply is located in a small town in the rural west. Data regarding...

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Accounting

Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:

  • Sales are budgeted at $248,000 for November, $288,000 for December, and $220,000 for January.
  • Collections are expected to be 60% in the month of sale and 40% 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 70% 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 $17,500.
  • Monthly depreciation is $20,000.
  • Ignore taxes.

Balance Sheet
October 31
Assets
Cash $ 20,000
Accounts receivable 79,500
Merchandise inventory 130,200
Property, plant and equipment, net of $624,000 accumulated depreciation 976,000
Total assets $ 1,205,700
Liabilities and Stockholders' Equity
Accounts payable $ 244,000
Common stock 745,000
Retained earnings 216,700
Total liabilities and stockholders' equity $ 1,205,700

The difference between cash receipts and cash disbursements for December would be:

Multiple Choice

  • $88,000

  • $33,000

  • $27,500

  • $47,500

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