Question

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

• Sales are budgeted at $330,000 for November, $310,000 for December, and $300,000 for January.
• Collections are expected to be 50% in the month of sale and 50% in the month following the sale.
• The cost of goods sold is 75% of sales.
• The company would like to maintain ending merchandise inventories equal to 65% 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 $23,900.
• Monthly depreciation is $14,900.
• Ignore taxes.

Balance Sheet October 31
Assets
Cash	$	21,300
Accounts receivable		71,300
Merchandise inventory		160,875
Property, plant and equipment, net of $573,300 accumulated depreciation		1,095,300
Total assets	$	1,348,775
Liabilities and Stockholders' Equity
Accounts payable	$	255,300
Common stock		821,300
Retained earnings		272,175
Total liabilities and stockholders' equity	$	1,348,775

The cost of December merchandise purchases would be:

Multiple Choice

• $146,250

• $232,500

• $227,625

• $247,500

Answer 1