Dilly Farm Supply Is Located in a Small Town in the Rural

question 44

Multiple Choice

Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:
o Sales are budgeted at $290,000 for November, $310,000 for December, and $210,000 for January.
o Collections are expected to be 65% in the month of sale and 35% in the month following the sale.
o The cost of goods sold is 80% of sales.
o The company desires to have an ending merchandise inventory at the end of each month equal to 70% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase.
o Other monthly expenses to be paid in cash are $21,100.
o Monthly depreciation is $21,000.
o Ignore taxes.

-The cost of December merchandise purchases would be:

• A) $248,000
• B) $232,000
• C) $117,600
• D) $192,000

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Definitions:

Accounts Receivable

The amount of money owed to a company by its customers for goods or services sold on credit.

Budgeted Sales

Forecasted revenue a company expects to generate from selling its products or services in a specific period.

Credit Sales

Transactions in which goods or services are provided to a customer with the agreement that payment will be made at a later date.

Accounts Receivable

Money owed to a company by its customers for goods or services that have been delivered but not yet paid for.