Question

Bramble Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow. • Sales are budgeted at $290,000 for November, $270,000 for December, and $260,000 for January • Collections are expected to be 40% in the month of sale and 60% 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 65% 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 $23,500 • Monthly depreciation is $14,500. • Ignore taxes Balance Sheet October 31 Assets Cash Accounts receivable Merchandise inventory Property, plant and equipment, net of $573, 780 accumulated depreciation Total assets 21,700 71,10 141,375 1,095,700 $1,330,475 Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings Total liabilities and stockholders' equity $ 255,700 821,700 253,075 $1,330,475

Answer 1

Cost of goods sold for december = $270,000 * 75% = $202,500.
Opening stock for December = $270,000 * 75% * 65% = $131,625.
Closing stock for december = $260,000 * 75% * 65% = $126,750

Cost of December Merchandize purchases = Cost of goods sold - Opening stock + closing stock
= $202,500 - $131,625 + $126,750
= $197,625.

Cost of December Merchandize purchases = $197,625.