Reference no: EM132527392
Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:
- Sales are budgeted at $307,000 for November, $327,000 for December, and $227,000 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 $22,800.
- Monthly depreciation is $29,500.
Balance Sheet
October 31Assets
Cash$35,000
Accounts receivable 85,500
Merchandise inventory 207,225
Property, plant and equipment, net of $624,000
accumulated depreciation 922,000
Total assets$1,249,725
Liabilities and Stockholders' Equity Accounts payable$256,000
Common stock 757,000
Retained earnings 236,725
Total liabilities and stockholders' equity$1,249,725
Question 1: The cost of December merchandise purchases would be:
Multiple Choice
Option 1: $245,250
Option 2: $153,225
Option 3: $177,750
Option 4: $230,250