Bracken Corporation is a small wholesaler of gourmet food products.Data regarding the store's operations follow: o Sales are budgeted at $330,000 for November,$340,000 for December,and $340,000 for January.
O Collections are expected to be 80% in the month of sale,17% in the month following the sale,and 3% uncollectible.
O The cost of goods sold is 75% of sales.
O The company would like to maintain ending merchandise inventories equal to 70% 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 $21,800.
O Monthly depreciation is $19,000.
O Ignore taxes. December cash disbursements for merchandise purchases would be:

Question

Bracken Corporation is a small wholesaler of gourmet food products.Data regarding the store's operations follow: o Sales are budgeted at $330,000 for November,$340,000 for December,and $340,000 for January.
O Collections are expected to be 80% in the month of sale,17% in the month following the sale,and 3% uncollectible.
O The cost of goods sold is 75% of sales.
O The company would like to maintain ending merchandise inventories equal to 70% 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 $21,800.
O Monthly depreciation is $19,000.
O Ignore taxes.  December cash disbursements for merchandise purchases would be:

Quizplus · Accepted Answer

Step 1: Calculate the cost of goods sold for December
Cost of goods sold = 75% of December sales budget
Cost of goods sold = 0.75 x $340,000 = $255,000

Step 2: Calculate the desired ending merchandise inventory for January
Desired ending merchandise inventory = 70% of January cost of goods sold
Desired ending merchandise inventory = 0.7 x (0.75 x $340,000) = $178,500

Step 3: Calculate the total cash disbursements for December
Total cash disbursements = cost of goods sold + desired ending merchandise inventory + other monthly expenses - collections in the month of sale 
Total cash disbursements = $255,000 + $178,500 + $21,800 - 80% of December sales budget
Total cash disbursements = $255,000 + $178,500 + $21,800 - 80% x $340,000
Total cash disbursements = $252,750

Therefore, the answer is D) $252,750.

Bracken Corporation Is a Small Wholesaler of Gourmet Food Products