Kevin Montgomery Retail seeks your assistance to develop cash and other budget information for May, June, and July. At April 30, the company had cash of $6,000, accounts receivable of $439,000, inventories of $448,250, and accounts payable of $135,055. The budget is to be based on the following assumptions: SALES: Each month's sales are billed on the last day of the month. Customers are allowed a 3% discount if payment is made within 10 days after the billing date. Receivables are recorded in the accounts at their gross amounts (not net of discounts). 55% of the billings are collected within the discount period; 30% are collected by the end of the month; 9% are collected by the end of the second month; and 6% turn out to be uncollectible. PURCHASES: The marketing, general, and administrative expenses and 60% of all purchases of merchandise are paid in the month purchased, with the remainder of merchandise purchases paid in the following month. The number of units in each month's ending inventory is equal to 125% of the next month's sales (units). The cost of each unit of inventory is $32. Marketing, general, and administrative expenses, of which $5,000 is depreciation, are equal to 15% of the current month's sales. Actual and projected sales are as shown below: Dollars Units March $474,000 12,000 April $486,000 12,300 $478,000 $458,000 12,100 11,600 Мay June July $482,000 12,200 August $482,000 12,400 What are the budgeted merchandise purchases (in dollars) for May? Multiple Choice $388,000. $385,900. $367,200. $407,910.

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Kevin Montgomery Retail seeks your assistance to develop cash and other budget information for May, June, and July. At April 30, the company had cash
of $6,000, accounts receivable of $439,000, inventories of $448,250, and accounts payable of $135,055. The budget is to be based on the following
assumptions:
SALES:
Each month's sales are billed on the last day of the month. Customers are allowed a 3% discount if payment is made within 10 days after the billing date.
Receivables are recorded in the accounts at their gross amounts (not net of discounts). 55% of the billings are collected within the discount period; 30% are
collected by the end of the month; 9% are collected by the end of the second month; and 6% turn out to be uncollectible.
PURCHASES:
The marketing, general, and administrative expenses and 60% of all purchases of merchandise are paid in the month purchased, with the remainder of
merchandise purchases paid in the following month. The number of units in each month's ending inventory is equal to 125% of the next month's sales
(units). The cost of each unit of inventory is $32. Marketing, general, and administrative expenses, of which $5,000 is depreciation, are equal to 15% of the
current month's sales.
Actual and projected sales are as shown below:
Dollars
Units
March
$474,000
12,000
April
$486,000
12,300
$478,000
$458,000
Мay
12,100
June
11,600
July
$482,000
12,200
August $482,000
12,400
What are the budgeted merchandise purchases (in dollars) for May?
Multiple Choice
$388,000.
$385,900.
$367,200.
$407,910.
Transcribed Image Text:Kevin Montgomery Retail seeks your assistance to develop cash and other budget information for May, June, and July. At April 30, the company had cash of $6,000, accounts receivable of $439,000, inventories of $448,250, and accounts payable of $135,055. The budget is to be based on the following assumptions: SALES: Each month's sales are billed on the last day of the month. Customers are allowed a 3% discount if payment is made within 10 days after the billing date. Receivables are recorded in the accounts at their gross amounts (not net of discounts). 55% of the billings are collected within the discount period; 30% are collected by the end of the month; 9% are collected by the end of the second month; and 6% turn out to be uncollectible. PURCHASES: The marketing, general, and administrative expenses and 60% of all purchases of merchandise are paid in the month purchased, with the remainder of merchandise purchases paid in the following month. The number of units in each month's ending inventory is equal to 125% of the next month's sales (units). The cost of each unit of inventory is $32. Marketing, general, and administrative expenses, of which $5,000 is depreciation, are equal to 15% of the current month's sales. Actual and projected sales are as shown below: Dollars Units March $474,000 12,000 April $486,000 12,300 $478,000 $458,000 Мay 12,100 June 11,600 July $482,000 12,200 August $482,000 12,400 What are the budgeted merchandise purchases (in dollars) for May? Multiple Choice $388,000. $385,900. $367,200. $407,910.
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