Expenses that are paid in the month they are incurred

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Reference no: EM133392310

Valley's managers have made the following additional assumptions and estimates:

Estimated sales for July and August are $345,000 and $315,000 respectively
Each month's sales are 20% cash sales and 80% credit sales. Each month's credit sales are collected 30% in the month of the sale and 70% in the month following the sale. All of the accounts receivable at June 30 will be collected in July
Each month's ending inventory must equal 20% of the cost of the next month's sales. The Cost of Goods Sold is 60% of sales. The company pays for 40% of its merchandise purchases in the month of the purchase and the remaining 60% in the month following the purchase. All of the accounts payable at June 30 will be paid in July
Monthly selling and administrative expenses are always $75,000. Each month $10,000 of this total amount is depreciation expense and the remaining $65,000 relates to expenses that are paid in the month they are incurred
The company does not plan to buy or sell any plant and equipment during July. It will not borrow any money, pay any dividends, issue any common stock or repurchase any of its own common stock during July

Reference no: EM133392310

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