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

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, 16% in the month following the sale, and 4% uncollectible.

·       The cost of goods sold is 75% 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 $24,000.

·       Monthly depreciation is $15,000.

·       Ignore taxes.

	Statement of Financial Position
	October 31
	Assets:
	Cash............................................................................................	$     20,000
	Accounts receivable (net of allowance for uncollectible accounts).................................................................................	70,000
	Inventory....................................................................................	153,000
	Property, plant and equipment (net of $572,000 accumulated depreciation)...........................................................................	1,094,000
	Total assets.................................................................................	$1,337,000
	Liabilities and Stockholders’ Equity:
	Accounts payable.......................................................................	$   254,000
	Common stock............................................................................	820,000
	Retained earnings.......................................................................	263,000
	Total liabilities and stockholders’ equity...................................	$1,337,000

      60. Expected cash collections in December are:

            A)      $54,400

            B)      $256,000

            C)      $320,000

            D)      $310,400

           

            Ans:  D     AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting     LO:  2     Level:  Hard

            Solution:

           

	December sales ($320,000 × 80%).....	$256,000
	November sales ($340,000 × 16%)....	54,400
	Total....................................................	$310,400

      61. The cost of December merchandise purchases would be:

            A)      $255,000

            B)      $139,500

            C)      $235,500

            D)      $240,000

           

            Ans:  C     AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting     LO:  3     Level:  Hard

            Solution:

		Sales	Cost of Goods Sold
	November...........................................	$340,000	$255,000
	December............................................	$320,000	$240,000
	January................................................	$310,000	$232,500

Merchandise purchases = Ending inventory + Cost of goods sold − Beginning inventory = ($232,500 × 60%) + $240,000 − ($240,000 × 60%)

= $139,500 + $240,000 − $144,000 = $235,500

      62. December cash disbursements for merchandise purchases would be:

            A)      $139,500

            B)      $246,000

            C)      $240,000

            D)      $235,500

           

            Ans:  B     AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting     LO:  3     Level:  Hard

            Solution:

           

November purchases = Ending inventory + Cost of good sold − Beginning inventory = ($240,000 × 60%) + $255,000 − ($255,000 × 60%)

= $144,000 + $255,000 − $153,000 = $246,000

December cash disbursements = November purchases = $246,000

      63. The excess (deficiency) of cash available over disbursements for December would be:

            A)      $40,400

            B)      $68,600

            C)      $28,200

            D)      $12,200

           

            Ans:  A     AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting     LO:  8     Level:  Hard

            Solution:

           

	December sales ($320,000 × 80%).....	$256,000
	November sales ($340,000 × 16%)....	54,400
	Total cash collections in December....	$310,400

November purchases = Ending inventory + Cost of good sold − Beginning inventory = ($240,000 × 60%) + $255,000 − ($255,000 × 60%)

= $144,000 + $255,000 − $153,000 = $246,000

December cash disbursements = November purchases = $246,000

Cash collections − Cash disbursements − Other monthly expenses

= $310,400 − $246,000 − $24,000 = $40,400