Reference no: EM132596464

Guess Farm Supply is located in a small town in Central Luzon. Data regarding the stores operation follow:

Sales are budgeted at P260,000 for November, P230,000 for December, and P210,000 for January. Collections are expected to be 80% in the month of sale, 19% in the month following the sale, and 1% uncollectible.

The cost goods sold is 65% of sales.

The company purchases 60% of its merchandise in the month prior to the month of sale and 40% in the month of sale. Payment for merchandise is made in the month following the purchase.

Other monthly expenses to be paid in cash are P20,300.

Monthly depreciation is P20,000.

Ignore taxes.

Balance Sheet

October 31

Assets

Cash P 27,000

A/R, net of AFDA 79,000

Inventory 101,400

PPE, (net of Acc. Dep P574,000) 1,082,000

Total Assets P 1,289,400

Liabilities and Equity

A/P P 169,000

Common Stock 740,000

Retained Earnings 380,000

Total Liabilities and Equity P 1,289,400

Question 1. Expected cash collections in December are

a. P230,000 b. P184,000

c. P233,400 d. P49,400

Question 2. The cost of December merchandise purchases would be:

a. P141,700 b. P169,000

c. P81,900 d. P149,500

Question 3. December cash disbursements for merchandise purchases would be

a. P141,700 b. P149,500

c. P157,300 d. P81,900

Question 4. The excess (deficiency) of cash available over disbursements for December would be

a. P55,800 b. P37,900

c. P93,700 d. P17,900

Question 5. The net income for December would be

a. P60,200 b. P37,900

c. P40,200 d. P55,800

Question 6. The cash balance at the end of December would be

a. P180,500 b. P153,500

c. P43,700 d. P81,300

Question 7. The accounts receivable balance, net of uncollectible accounts, at the end of December would be

a. P46,000 b. P93,100

c. P43,700 d. P81,300

Question 8. Accounts payable at the end of December would be:

a. P81,900 b. P141,700

c. P59,800 d. P149,500

Question 9. Retained earnings at the end of December would be:

a. P380,400 b. P418,300

c. P471,300 d. P466,400