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Bracken Corporation is a small wholesaler of gourmet food products. Data regarding the store’s operations follow: |
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Sales are budgeted at $300,000 for November, $310,000 for December, and $310,000 for January. |
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Collections are expected to be 80% in the month of sale, 17% in the month following the sale, and 3% uncollectible. |
| • | The cost of goods sold is 65% of sales. |
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The company would like to maintain ending merchandise inventories equal to 55% 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 $20,700. |
| • | Monthly depreciation is $17,900. |
| • | Ignore taxes. |
| Balance Sheet | |
| October 31 | |
| Assets | |
| Cash | $51,000 |
| Accounts receivable, net of allowance for uncollectible accounts | 99,000 |
| Merchandise inventory | 107,250 |
| Property, plant and equipment, net of $627,000 accumulated depreciation | 1,285,000 |
| Total assets |
$1,542,250 |
| Liabilities and Stockholders’ Equity | |
| Accounts payable | $291,250 |
| Common stock | 870,000 |
| Retained earnings | 381,000 |
| Total liabilities and stockholders’ equity |
$1,542,250 |
December cash disbursements for merchandise purchases would be:
$191,425
$198,575
$201,500
$110,825
