Korn Inc, Projects Sales for Its First Three Months of Operation

question 38

Multiple Choice

Korn Inc., projects sales for its first three months of operation as follows: $\begin{array}{lccc}&\text { October}&\text { November }&\text { December }\\\text {Credit sales } & \$ 100,000 & \$ 150,000 & \$ 200,000 \\ \text { Cash sales } & 40,000 & 60,000 & 50,000 \\ \text { Tota } & \$ 140,000 & \$ 210,000 & \$250,000\\\end{array}$

Inventory on October 1 is $40,000. Subsequent beginning inventories should be 40% of that month's cost of goods sold. Goods are priced at 140% of their cost. 50% of purchases are paid for in the month of purchase; the balance is paid in the following month. It is expected that 50% of credit sales will be collected in the month following sale, 30% in the second month following the sale, and the balance the third month. A 5% discount is given if payment is received in the month following sale.
(Appendix 10A) What are the anticipated cash disbursements for October?

• A) $120,000
• B) $180,000
• C) $140,000
• D) $60,000

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