Question

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

  

•	Sales are budgeted at $250,000 for November, $260,000 for December, and $260,000 for January.
•	Collections are expected to be 75% in the month of sale, 24% in the month following the sale, and 1% uncollectible.
•	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 $21,000.
•	Monthly depreciation is $18,200.
•	Ignore taxes.

Balance Sheet
October 31
Assets
Cash	$48,000
Accounts receivable, net of allowance for uncollectible accounts	96,000
Merchandise inventory	140,000
Property, plant and equipment, net of $624,000 accumulated depreciation	1,270,000
Total assets	$1,554,000
Liabilities and Stockholders' Equity
Accounts payable	$336,750
Common stock	840,000
Retained earnings	377,250
Total liabilities and stockholders' equity	$1,554,000

  
December cash disbursements for merchandise purchases would be:

$194,400

$205,600

$145,600

$208,000

Answer 1

December cash disbursement for merchandise purchase would be november purchase :

November purchase = (250000*80%)+(260000*80%*70%)-140000 = 205600

So answer is b) $205600