Dilbert Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: o Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January.
O Collections are expected to be 80% in the month of sale, 19% in the month following the sale, and 1% uncollectible.
O The cost of goods sold is 65% of sales.
O The company desires to have an ending merchandise inventory at the end of each month equal to 60% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase.
O Other monthly expenses to be paid in cash are $20,300.
O Monthly depreciation is $20,000.
O Ignore taxes. Expected cash collections in December are:
A)$230,000
B)$184,000
C)$233,400
D)$49,400

Question

Dilbert Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: o Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January.
O Collections are expected to be 80% in the month of sale, 19% in the month following the sale, and 1% uncollectible.
O The cost of goods sold is 65% of sales.
O The company desires to have an ending merchandise inventory at the end of each month equal to 60% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase.
O Other monthly expenses to be paid in cash are $20,300.
O Monthly depreciation is $20,000.
O Ignore taxes.  Expected cash collections in December are:
A)$230,000 
B)$184,000 
C)$233,400 
D)$49,400

Quizplus · Accepted Answer

To calculate the expected cash collections in December, we need to determine the percentage of November sales that will be collected in December and the percentage of December sales that will also be collected in December.

For November sales: 
Expected cash collections = November sales * 80% = $260,000 * 0.8 = $208,000

For December sales: 
Expected cash collections = December sales * 80% + November sales * 19% = $230,000 * 0.8 + $260,000 * 0.19 = $233,400

Therefore, the correct answer is C.

Dilbert Farm Supply Is Located in a Small Town in the Rural