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

question 26

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 goods sold for October?

• A) $140,000
• B) $220,000
• C) $257,000
• D) $100,000

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Definitions:

Unconscionability

A doctrine in contract law that describes terms that are so unjustly one-sided that they are considered shockingly unfair or oppressive.

Doctrine of Privity

A principle that states a contract cannot confer rights or impose obligations arising under it on any person or agent except the parties to it.

Statutory Assignment

The transfer of rights or benefits from one party to another as permitted or dictated by statute.

Chose in Action

A personal right to property that is recoverable through legal action, such as debts owed or rights in a contract.