Kelita Ltd, Projects Sales for Its First Three Months of Operation

question 11

Multiple Choice

Kelita Ltd, projects sales for its first three months of operation as follows: Inventory on 1^st October 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.
What is the projected cost of purchases for October?

• A) $80,000
• B) $93,333
• C) $120,000
• D) $180,000

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