Question

Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: 18 • Sales are budgeted at $251,000 for November, $291,000 for December, and $218,000 for January . Collections are expected to be 60% in the month of sale and 40% in the month following the sale. • The cost of goods sold is 75% of sales. • The company desires to have an ending merchandise inventory at the end of each month equal to 90% 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 $20,000. • Monthly depreciation is $25,000. • Ignore taxes. $ Balance Sheet October 31 Assets Cash Accounts receivable Merchandise inventory Property, plant and equipment, net of $624,000 accumulated depreciation Total assets 26,000 81,000 169,425 946,000 $1,222, 425 Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings Total liabilities and stockholders' equity $ 247,000 748,000 227,425 $1,222,425 Retained earnings at the end of December would be: Multiple Choice 0 $251,925 O $272,325 O $227,425 O $272,925

Answer 1

18) Net income = (542000*75%)-40000-50000 = 316500

Retained earnings at the end of December = 227425+316500 = 543925

20) December purchase = (330000*70%)+(230000*70%*90%)-(330000*70%*90%) = 168000

Account payable = 168000

So answer is a) $168000