Question

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

• Sales are budgeted at $320,000 for November, $300,000 for December, and $290,000 for January.
• Collections are expected to be 55% in the month of sale and 45% in the month following the sale.
• The cost of goods sold is 70% 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 $23,800.
• Monthly depreciation is $14,800.
• Ignore taxes.

Balance Sheet October 31
Assets
Cash	$	21,400
Accounts receivable		71,400
Merchandise inventory		156,800
Property, plant and equipment, net of $573,400 accumulated depreciation		1,095,400
Total assets	$	1,345,000
Liabilities and Stockholders' Equity
Accounts payable	$	255,400
Common stock		821,400
Retained earnings		268,200
Total liabilities and stockholders' equity	$	1,345,000

The cost of December merchandise purchases would be:

Answers:

• $142,100

• $205,100

• $210,000

• $224,000

Answer 1

Answer) $205100

December, beginning Inventory = 300000 x 70% x 70% = 147000

December, Ending Inventory = 290000 x 70% x 70% = 142100

Cost of goods sold for december = 300000 x 70% = 210000

Cost of goods sold = Beg Inventory + Purchases - Ending Inventory

210000 = 147000 + Purchases - 142100

Purchases = 205100