Nformation on the Actual Sales and Inventory Purchases of the Law

question 117

Multiple Choice

nformation on the actual sales and inventory purchases of the Law Company for the first quarter follow:
$\begin{array} { | l | r | r | } \hline & \text { Inventory Sales } & \text { Purchases } \\\hline \text { January } & \$ 120,000 & \$ 60,000 \\\hline \text { February } & 100,000 & 78,000 \\\hline \text { March } & 130,000 & 90,000 \\\hline\end{array}$
Collections from Law Company's customers are normally 60% in the month of sale, 30% in the month following sale, and 8% in the second month following sale. The balance is uncollectible. Law Company takes full advantage of the 3% discount allowed on purchases paid for by the end of the following month.

The company expects sales in April of $150,000 and inventory purchases of $100,000. Operating expenses for the month of April are expected to be $38,000, of which $15,000 is salaries and $8,000 is depreciation. The remaining operating expenses are variable with respect to the amount of sales in dollars. Those operating expenses requiring a cash outlay are paid for during the month incurred. Law Company's cash balance on March 1 was $43,000, and on April 1 was $35,000.



-What would be the expected cash disbursements during April for inventory purchases?

• A) $87,300.
• B) $90,000.
• C) $97,000.
• D) $100,000.

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Definitions:

Investing Activities

Transactions related to the acquisition or disposal of long-term assets and other investments not classified as cash equivalents.

Financing Activity

Refers to transactions and events that affect long-term liabilities and equity of a company, including securing loans and issuing shares.

Investing Activity

Financial actions related to the acquisition and disposal of long-term assets and other investments not considered as cash equivalents.

Mortgage Payable

A long-term liability representing the amount owed on a property mortgage, which is to be paid back over a period.