Gold Company Has the Following Balances at 31^st December 31

question 6

Multiple Choice

Gold Company has the following balances at 31^st December 31 2010: Cash $6,000; accounts receivable $34,000 ($10,000 from November and $24,000 from December) ; merchandise inventory $40,000; and accounts payable $20,000 (for merchandise purchases only) . Budgeted sales follow: Other data:
· Sales are 40% cash, 50% collected during the following month, and 10% collected during the second month after sale. A 3% cash discount is given on cash sales
· Cost of goods sold is 40% of sales
· Ending inventory must be 140% of the next month's cost of sales
· Purchases are paid 70% in month of purchase and 30% in the following month
· The selling and administrative cost function is: $6,000 + $0.2 × sales. This includes $1,000 for depreciation
· All costs are paid in the month incurred
· Minimum cash balance requirement is $6,000
What is the budgeted cost of purchases for February?

• A) $19,200
• B) $30,400
• C) $15,000
• D) $52,800

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