Question

Hamby Corporation is a merchandising company that is preparing a master budget for the third quarter of the calendar year. The company's balance sheet as of June 30th is shown below: Hamby Corporation Balance Sheet June 30 Assets Cash $ 74,000 Accounts receivable 143,000 Inventory 73,500 Plant and equipment, net of depreciation 224,000 Total assets $ 514,500 Liabilities and Stockholders' Equity Accounts payable $ 85,000 Common stock 310,000 Retained earnings 119,500 Total liabilities and stockholders' equity $ 514,500 The company managers have made the following additional assumptions and estimates: 1. Estimated sales for July, August, September, and October will be $350,000, $370,000, $360,000, and $380,000 respectively. 2. All sales are on credit and all credit sales are collected. Each month's credit sales are collected 35% in the month of sale and 65% in the month following the sale. All of the accounts receivable at June 30 will be collected in July, 3. Each month's ending inventory must equal 30% of the cost of next month's sales. The cost of goods sold is 70% of sales. The company pays for 40% of its merchandise purchases in the month of the purchase and the remaining 60% in the month following the purchase. All of the accounts payable at June 30 will be paid in July, 4. Monthly selling and administrative expenses are always $46,000. Each month $7,000 of this total amount is depreciation expense and the remaining $39.000 relates to expenses that are paid in the month they are incurred.

Answer 1

Correct Option C i.e. $357000
	July	August	September	October
Estimated Sales	350,000	370,000	360,000	380,000
Cash Collecetion in same month	122,500	129,500	126,000	133,000
Cash Collecetion in following month		227,500	240,500	234,000
Total collecetion		357,000	366,500	367,000