Problem:
Dilbert Farm Supply is located in a small town in the rural west. Data regarding the store’s operations follow:
Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January.
Collections are expected to be 80% in the month of sale, 19% in the month following the sale, and 1% uncollectible.
The cost of goods sold is 65% of sales.
The company purchases 60% of its merchandise in the month prior to the month of sale and 40% in the month of sale. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $20,300.
Monthly depreciation is $20,000.
Ignore taxes.
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Statement of Financial Position
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October 31
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Assets
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Cash.................................................................
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$ 27,000
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Accounts receivable
(net of allowance for uncollectible accounts).................................
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79,000
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Inventory.............................................................................................
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101,400
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Property, plant and equipment
(net of $574,000 accumulated depreciation).................................
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1.082.000
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Total assets ................................................................................................ $1.289,400
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Liabilities and Stockholders' Ecty
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Accounts payable...............................................................................
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$ 169,000
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Common stock...................................................................................
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740,000
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Retained earnings...............................................................................
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380.400
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Total liabilities and stockholders' equity..........................................
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$1.289.400
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Question 1: The cash balance at the end of December would be:
A) $180,500
B) $153,500
C) $82,800
D) $27,000
Question 2: The accounts receivable balance, net of uncollectible accounts, at the end of December would be:
A) $46,000
B) $93,100
C) $43,700
D) $81,300
Question 3: Accounts payable at the end of December would be:
A) $81,900
B) $141,700
C) $59,800
D) $149,500
Question 4: Retained earnings at the end of December would be:
A) $380,400
B) $418,300
C) $471,300
D) $466,400