(CA)The Dilly Company Marks Up All Merchandise at 25% of Gross

question 19

Multiple Choice

(CA) The Dilly Company marks up all merchandise at 25% of gross purchase price. All purchases are made on account with terms of 1/10, (1% discount if paid in 10 days) net/60 (full amount due within 60 days) . Purchase discounts, which are recorded as miscellaneous income, are always taken. Normally, 60% of each month's purchases are paid for in the first month after purchase, whereas the other 40% are paid during the first 10 days of the first month after purchase. Inventories of merchandise at the end of each month are kept at 30% of the next month's forecasted cost of goods sold. Terms for sales on account are 2/10 (2% discount if paid within 10 days) , net/30 (full amount due in 30 days) . Cash sales are not subject to discount. Fifty percent of each month's sales on account are collected during the month of sale, 45% are collected in the succeeding month, and the remainder is usually uncollectible. Seventy percent of the collections in the month of sale are subject to discount, and 10% of the collections in the succeeding month are subject to discount (2%) .
Forecasted sales data and cost of sales for selected months are as follows:
Sales on
Account (Gross) Cash Sales Cost of Goods sold
December $1,900,000 $400,000 $1,840,000
January 1,500,000 250,000 1,400,000
February 1,700,000 350,000 1,640,000
March 1,600,000 300,000 1,520,000
(Appendix 10A) Forecasted total collections from customers during February are:

• A)$1,875,000
• B)$1,861,750
• C)$1,511,750
• D)$1,188,100
• E)None of the above

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Definitions:

Self-other Knowledge Asymmetry

The disparity in knowledge that an individual has about themselves compared to what others know about them.

Self-perception Theory

A psychological theory suggesting that individuals develop their attitudes and feelings by observing their own behavior and concluding what attitudes must have caused them.

Symbolic Interactionism

A sociological perspective stressing the importance of symbolic communication and how social reality is constructed through interaction in social contexts.

Social Role Theory

The theory that much of social behavior is determined by societal expectations and norms associated with each individual's roles.