Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: Sales are budgeted at $254,000 for November, $294,000 for December, and $221,000 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 80% of sales. The company desires to have an ending merchandise inventory at the end of each month equal to 90% 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 $15,600. Monthly depreciation is $26,500. Ignore taxes. Balance Sheet October 31 Assets Cash $ 32,000 Accounts receivable 82,500 Merchandise inventory 182,880 Property, plant and equipment, net of $624,000 accumulated depreciation 916,000 Total assets $ 1,213,380 Liabilities and Stockholders' Equity Accounts payable $ 250,000 Common stock 751,000 Retained earnings 212,380 Total liabilities and stockholders' equity $ 1,213,380 The cost of December merchandise purchases would be: Multiple Choice $182,640 $203,200 $159,120 $235,200
Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: Sales are budgeted at $254,000 for November, $294,000 for December, and $221,000 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 80% of sales. The company desires to have an ending merchandise inventory at the end of each month equal to 90% 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 $15,600. Monthly depreciation is $26,500. Ignore taxes. Balance Sheet October 31 Assets Cash $ 32,000 Accounts receivable 82,500 Merchandise inventory 182,880 Property, plant and equipment, net of $624,000 accumulated depreciation 916,000 Total assets $ 1,213,380 Liabilities and Stockholders' Equity Accounts payable $ 250,000 Common stock 751,000 Retained earnings 212,380 Total liabilities and stockholders' equity $ 1,213,380 The cost of December merchandise purchases would be: Multiple Choice $182,640 $203,200 $159,120 $235,200
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:
- Sales are budgeted at $254,000 for November, $294,000 for December, and $221,000 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 80% of sales.
- The company desires to have an ending merchandise inventory at the end of each month equal to 90% 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 $15,600.
- Monthly
depreciation is $26,500. - Ignore taxes.
| Balance Sheet October 31 |
||
| Assets | ||
| Cash | $ | 32,000 |
| 82,500 | ||
| Merchandise inventory | 182,880 | |
| Property, plant and equipment, net of $624,000 |
916,000 | |
| Total assets | $ | 1,213,380 |
| Liabilities and |
||
| Accounts payable | $ | 250,000 |
| Common stock | 751,000 | |
| 212,380 | ||
| Total liabilities and stockholders' equity | $ | 1,213,380 |
The cost of December merchandise purchases would be:
Multiple Choice
-
$182,640
-
$203,200
-
$159,120
-
$235,200
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