Question

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

• Sales are budgeted at $310,000 for November, $290,000 for December, and $280,000 for January.
• Collections are expected to be 60% in the month of sale and 40% in the month following the sale.
• The cost of goods sold is 65% of sales.
• The company would like to maintain ending merchandise inventories equal to 55% 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 $23,700.
• Monthly depreciation is $14,700.
• Ignore taxes.

Balance Sheet October 31
Assets
Cash	$	21,500
Accounts receivable		71,500
Merchandise inventory		110,825
Property, plant and equipment, net of $573,500 accumulated depreciation		1,095,500
Total assets	$	1,299,325
Liabilities and Stockholders' Equity
Accounts payable	$	255,500
Common stock		821,500
Retained earnings		222,325
Total liabilities and stockholders' equity	$	1,299,325

The difference between cash receipts and cash disbursements for December would be:

Multiple Choice

• $59,963

• $44,625

• $122,100

• $79,950

2.

Budgeted sales in Acer Corporation over the next four months are given below:

	September			October		November		December
Budgeted sales	$120,000			$140,000		$180,000		$160,000

Thirty percent of the company’s sales are for cash and 70% are on account. Collections for sales on account follow a stable pattern as follows: 50% of a month’s credit sales are collected in the month of sale, 30% are collected in the month following sale, and 20% are collected in the second month following sale. Given these data, cash collections for December should be:

Multiple Choice

• $141,800

• $100,500

• $118,700

• $161,400

3.

Sparks Corporation has a cash balance of $17,700 on April 1. The company must maintain a minimum cash balance of $14,500. During April, expected cash receipts are $65,000. Cash disbursements during the month are expected to total $77,500. Ignoring interest payments, during April the company will need to borrow:

Multiple Choice

• $14,500

• $5,200

• $9,300

• $12,500

Answer 1

1) Sales = 310000( november sale)* 40% (cash collections) + 290000(dec sales)*60% cash collections= $298,000

cost of sales= 290000*65%=188500+desired inventory next month(280000*65%*55%)- opening inventory(110825)= $177,775. therefore 298000-177775

2) For the month of december= 140000*70%(october credit sales)*20%(cash collection made for oct credit sale)+ 180000*70%(November credit sales)*30%( cash collection for november sale)+ 160000*70%( dec credit sales)* 50%(cash collection for december) + 160000*30(cash sales for december)

answer= 19600+37800+56000+48000= option D)161400

3) 17700(cash balance at start)+ 65000 (cash receipts) - 14500 (minimum balance)- 77500(cash disbursements)

Answer C)= $9300