Question

Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: • Sales are budgeted at $293,000 for November, $313,000 for December, and $213.000 for January . Collections are expected to be 65% in the month of sale and 35% in the month following the sale. • The cost of goods sold is 80% of sales. • The company desires to have an ending merchandise inventory at the end of each month 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 $21.400. · Monthly depreciation is $22,500. . Ignore taxes. Balance Sheet October 31 Assets Cash $ 26,500 78,500 182,900 Accounts receivable Merchandise inventory Property, plant and equipment, net of $624,000 accumulated depreciation Total assets 1,007.000 $1,294,900 Liabilities and Stockholders' Equity recounts payable Common stock Retained earnings Total liabilities and stockholders' equity $ 239,000 743,000 312,900 $1.294,900 Expected cash collections in December are: Multiple Choice O $203.450 O $102,550 0 $313.000 O $306.000

Answer 1

Correct answer is: $306,000
Expected cash collections
December
Month	Sales	Percent	Expected collections
	(i)	(ii)	(i) X (ii)
November	$ 2,93,000	35%	$                      1,02,550
December	$ 3,13,000	65%	$                      2,03,450
Total			$                      3,06,000