Brarin Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow: Sales are budgeted at $380,000 for November, $400,000 for December, and $390,000 for January.
Collections are expected to be 60% in the month of sale, 39% in the month following the sale, and 1% uncollectible.
The cost of goods sold is 75% of sales.
The company would like to maintain ending merchandise inventories equal to 65% 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 $23,500. Monthly depreciation is $21,400. Ignore taxes. December cash disbursements for merchandise purchases would be:
The cash disbursements are the outflow of the cash. This means the cash goes away from the company when the companies paid for the goods and services purchased.
Answer and Explanation:
December cash disbursements for merchandise purchases = Purchase made in November
November Purchase = COGS in November + Ending Inventory of November - Beginning an inventory of November
November Purchase = 380,000*75% + 65%*(75%*400,000) - 65%*(75%*380,000)
November Purchase = $ 294,750
December cash disbursements for merchandise purchases = $294,750
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from Finance 101: Principles of FinanceChapter 18 / Lesson 4