Question

Bramble Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow: Sales are budgeted at $280.000 for November. $260.000 for December, and $250,000 for January · Collections are expected to be 45% in the month of sale and 55% in the month following the sale. • The cost of goods sold is 80% of sales. . The company would like to maintain ending merchandise inventories 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 $23.400. • Monthly depreciation is $14.400. . Ignore taxes. Balance Sheet October 31 Assets Cash Accounts receivable Merchandise inventory Property, plant and equipment, net of $573,800 accumulated depreciation Total assets $ 21,800 71,800 156,800 1,095,800 $1,346,200 Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings Total liabilities and stockholders' equity $ 255,800 821,800 268,600 $1,346,200 The difference between cash receipts and cash disbursements for December would be: 0 0 0 0

Answer 1

Computation the amount of difference is:

Amount of difference = Amount of total cash receipts - Amount of total cash disbursements

= $271,000 - $236,200

= $34,800

Hence, the amount of difference is $34,800, that is, the option a is correct.

Working notes:

1.

Computation the amount of cash receipt in December for November is:

Amount of cash receipt in December for November = Total sales of November * Percentage of cash receipt in December

= $280,000 * 55%

= $154,000

Hence, the amount of cash receipt in November is $154,000.

2.

Computation the amount of cash receipt in December is:

Amount of cash receipt in December = Total sales of December * Percentage of cash receipt in December

= $260,000 * 45%

= $117,000

Hence, the amount of cash receipt in December is $117,000.

3.

Computation the amount of total cash receipts is:

Amount of total cash receipts = Amount of cash receipt in December for November + Amount of cash receipt in December

= $154,000 + $117,000

= $271,000

Hence, the amount of total cash receipts is $271,000.

4.

Computation the amount of total purchases is:

Amount of total purchases = (Total sales of November * Percentage of cost of goods sold) + (Total sales of December * Percentage of cost of goods sold * Percentage of inventories) - (Total sales of November * Percentage of cost of goods sold * Percentage of inventories)

= ($280,000 * 80%) + ($260,000 * 80% * 70%) - ($280,000 * 80% * 70%)

= $224,000 + $145,600 - $156,800

= $212,800

Hence, the amount of total purchases is $212,800.

5.

Computation the amount of total cash disbursements is:

Amount of total cash disbursements = Amount of total purchases + Amount of other monthly expenses

= $212,800 + $23,400

= $236,200

Hence, the amount of total cash disbursements is $236,200.