Question

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

• Sales are budgeted at $440,000 for November, $420,000 for December, and $410,000 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 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 $25,000.
• Monthly depreciation is $16,000.
• Ignore taxes.

Balance Sheet October 31
Assets
Cash	$	21,000
Accounts receivable		71,000
Merchandise inventory		246,400
Property, plant and equipment, net of $573,000 accumulated depreciation		1,095,000
Total assets	$	1,433,400
Liabilities and Stockholders' Equity
Accounts payable	$	255,000
Common stock		821,000
Retained earnings		357,400
Total liabilities and stockholders' equity	$	1,433,400

Expected cash collections in December are:

Answer 1

Answer

• Expected Cash Collection in December
  = (65% of December sale) + (35% of November sales)
  = (420000 x 65%) + (440000 x 35%)
  = 273000 + 154000
  = $ 427,000 Answer