Question

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

• Sales are budgeted at $350,000 for November, $330,000 for December, and $320,000 for January.
• Collections are expected to be 45% in the month of sale and 55% 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 80% 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 $24,100.
• Monthly depreciation is $15,100.
• Ignore taxes.

Balance Sheet October 31
Assets
Cash	$	20,100
Accounts receivable		70,100
Merchandise inventory		210,000
Property, plant and equipment, net of $572,100 accumulated depreciation		1,094,100
Total assets	$	1,394,300
Liabilities and Stockholders' Equity
Accounts payable	$	254,100
Common stock		820,100
Retained earnings		320,100
Total liabilities and stockholders' equity	$	1,394,300

Expected cash collections in December are:

Answer 1

		$
	November	December	January
Sales	350,000	330,000	320,000
Collection pattern
Month of sale	45%
Month following the sale	55%
Expected cash collections in December
From sales
December	148,500	(330,000*45%)
November	192,500	(350,000*55%)
	341,000