Bramble Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow:Sales are budgeted at $340,000 for November, $320,000 for December, and $310,000 for January.Collections are expected to be 80% in the month of sale and 20% 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 60% 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 $24,000.Monthly depreciation is $15,000.Ignore taxes. Expected cash collections in December are:

A) $68,000
B) $256,000
C) $320,000
D) $324,000

Question

Bramble Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow:Sales are budgeted at $340,000 for November, $320,000 for December, and $310,000 for January.Collections are expected to be 80% in the month of sale and 20% 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 60% 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 $24,000.Monthly depreciation is $15,000.Ignore taxes.

Expected cash collections in December are:

A) $68,000
B) $256,000
C) $320,000
D) $324,000

Ashlie Elizabeth · Accepted Answer

Final Answer : D, Explanation :  To calculate expected cash collections in December, we need to start with November's sales, which are budgeted at $340,000. Of that amount, 80% is expected to be collected in the month of sale (November), which equals $272,000. The remaining 20% is expected to be collected in the following month (December), which equals $68,000.Therefore, the answer is D) $324,000.

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