Question

Information pertaining to Yekstop Corp.'s sales revenue is presented below:

	November				December				January
Cash sales	$	107,000			$	136,000			$	89,000
Credit sales		299,000				461,000				245,000
Total sales	$	406,000			$	597,000			$	334,000

Management estimates that 4% of credit sales are eventually uncollectible. Of the collectible credit sales, 60% are likely to be collected in the month of sale and the remainder in the month following the month of sale. The company desires to begin each month with an inventory equal to 80% of the sales projected for the month. All purchases of inventory are on open account; 30% will be paid in the month of purchase, and the remainder paid in the month following the month of purchase. Purchase costs are approximately 55% of the selling prices.

Budgeted cash payments in November for November inventory purchases by Yekstop Corp. are:

Multiple Choice

$76,804.

$156,310.

$121,800.

$92,202.

$215,138.

Answer 1

Expected sales in november	$ 406,000
Cost of goods sold in november ($406,000*55%)	$ 223,300
Add: Desired ending inventory ($597,000*55%*80%)	$ 262,680
Less: Budgeted ending inventory ($223,300*80%)	$ 178,640
Cost of goods purchased in November	$ 307,340
Cash payment in november for november purchases ($307,340*30%)	$    92,202

Answer is D. $92,202

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