Brarin Corporation Is a Small Wholesaler of Gourmet Food Products

question 86

Multiple Choice

Brarin Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow:

• Sales are budgeted at $340,000 for November, $360,000 for December, and $350,000 for January.
• Collections are expected to be 55% in the month of sale, 44% in the month following the sale, and 1% uncollectible.
• The cost of goods sold is 80% of sales.
• The company would like to maintain ending merchandise inventories equal to 70% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase.
• Other monthly expenses to be paid in cash are $23,100.
• Monthly depreciation is $21,000.
• Ignore taxes.

-Expected cash collections in December are:

• A)$360,000
• B)$149,600
• C)$198,000
• D)$347,600

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Definitions:

Stripped Treasuries

Securities derived from U.S. Treasury bonds by separating the coupons from the principal, allowing them to be sold separately as zero-coupon bonds.

Pure Yield Curve

A theoretical representation of the rates of interest for zero-coupon bonds across different maturities under the assumption of no risk.

Coupon Bond

A type of bond that pays the holder a fixed interest rate (coupon) over its lifetime, and the principal amount is repaid at maturity.

Yield To Maturity

Yield to Maturity (YTM) is the total anticipated return on a bond if the bond is held until it matures, accounting for interest payments and principal repayment.