Brarin Corporation is a small wholesaler of gourmet food products. Data regarding the store's...

Question:

Brarin Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow: Sales are budgeted at $350,000 for November, $370,000 for December, and $360,000 for January. Collections are expected to be 45% in the month of sale, 53% in the month following the sale, and 2% uncollectible. The cost of goods sold is 75% of sales. The company would like to maintain ending merchandise inventories equal to 80% 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 $23,200. Monthly depreciation is $21,100. Ignore taxes. December cash disbursements for merchandise purchases would be: a.$274,500 b.$216,000c. $277,500 d.$271,500

Cash disbursements:

The cash disbursements are known as a cash payment. The cash payment is the amount of cash paid to the other party in an accounting period by the company. It also includes electronic payments along with cash.

Answer and Explanation:

Brarin Corporation

November December January
A Sales $ 3,50,000 $ 3,70,000 $ 3,60,000
B Cost of Goods sold (75% of sales) $ 2,62,500 $ 2,77,500 $ 2,70,000
C Ending Inventory (80% of next months CGS) $ 2,22,000 $ 2,16,000
D Beginning Inventory $ 2,10,000 $ 2,22,000 $ 2,16,000
E Purchases ( B + C - D) $ 2,74,500 $ 2,71,500
F Payment for purchase (paid in next month) $ 2,74,500 $ 2,71,500

Answer December cash disbursements for merchandise purchase would be $ 274,500

Note: Closing inventory of October will be 80 % of the cost of goods sold in the month of november.


Learn more about this topic:

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How to Manage Cash Disbursements

from Finance 101: Principles of Finance

Chapter 18 / Lesson 4
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