Answer the Following Questions Using the Information Below:
Wallace Company

question 110

Multiple Choice

Answer the following questions using the information below:
Wallace Company provides the following data for next year:
$$\begin{array} { l c } \text { Month } & \text { Budgeted Sales } \\\text { January } & \$ 120,000 \\\text { February } & 108,000 \\\text { March } & 132,000 \\\text { April } & 144,000\end{array}$$ The gross profit rate is 35% of sales. Inventory at the end of December is $21,600 and target ending inventory levels are 20% of next month's sales, stated at cost.
-What is the amount of purchases budgeted for January?

• A) $63,960
• B) $70,440
• C) $78,000
• D) $92,040

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Definitions:

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year, calculated as current assets divided by current liabilities.

Short-Term Investments

Investments that are made with the expectation of converting them into cash within a short period, usually one year or less.

Net Receivables

the total amount of money owed to a company by its customers minus any amounts that are expected to be uncollectible.

Current Liabilities

Short-term financial obligations that are due within one year or within the normal operating cycle of the business, whichever is longer.