Question

Bramble Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow:

• Sales are budgeted at $340,000 for November, $320,000 for December, and $310,000 for January.
• Collections are expected to be 80% in the month of sale and 20% in the month following the sale.
• The cost of goods sold is 75% of sales.
• The company would like to maintain ending merchandise inventories equal to 60% 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 $24,000.
• Monthly depreciation is $15,000.
• Ignore taxes.

Balance Sheet October 31
Assets
Cash	$	20,000
Accounts receivable		70,000
Merchandise inventory		153,000
Property, plant and equipment, net of $572,000 accumulated depreciation		1,094,000
Total assets	$	1,337,000
Liabilities and Stockholders' Equity
Accounts payable	$	254,000
Common stock		820,000
Retained earnings		263,000
Total liabilities and stockholders' equity	$	1,337,000

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

Answer 1

Cash receipt for December = (340000*20%+320000*80%) = 324000

Purchase for November = (340000*75%)+(320000*75%*60%)-153000 = 246000

Cash payment for December = 246000+24000 = 270000

The difference between cash receipts and cash disbursement for December = 324000-270000 = 54000