The Bandeiras Company, a merchandising firm, has budgeted its activity for December according to the following information:

I. Sales at $550,000, all for cash.
II. Merchandise inventory on November 30 was $300,000.
III. Budgeted depreciation for December is $35,000.
IV. The cash balance at December 1 was $25,000.
V. Selling and administrative expenses are budgeted at $60,000 for December and are paid in cash.
VI. The planned merchandise inventory on December 31 is $270,000.
VII. The invoice cost for merchandise purchases represents 75% of the sales price. All purchases are paid for in cash.

-What are the budgeted cash disbursements for December?

Question

The Bandeiras Company, a merchandising firm, has budgeted its activity for December according to the following information:

I. Sales at $550,000, all for cash.
II. Merchandise inventory on November 30 was $300,000.
III. Budgeted depreciation for December is $35,000.
IV. The cash balance at December 1 was $25,000.
V. Selling and administrative expenses are budgeted at $60,000 for December and are paid in cash.
VI. The planned merchandise inventory on December 31 is $270,000.
VII. The invoice cost for merchandise purchases represents 75% of the sales price. All purchases are paid for in cash.

-What are the budgeted cash disbursements for December?

Quizplus · Accepted Answer

The budgeted cash disbursements for December include merchandise purchases, selling and administrative expenses, and depreciation. However, depreciation is a non-cash expense and should not be included in cash disbursements. To calculate merchandise purchases: Sales of $550,000 * 75% = $412,500. The change in inventory (increase or decrease) also affects cash disbursements for purchases. The inventory is planned to decrease from $300,000 to $270,000, reducing the need for additional cash outlay for purchases by $30,000. Therefore, cash disbursements for purchases are $412,500 - $30,000 = $382,500. Adding the selling and administrative expenses of $60,000, the total budgeted cash disbursements for December are $382,500 + $60,000 = $442,500.

The Bandeiras Company, a Merchandising Firm, Has Budgeted Its Activity