Dilbert Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January.
Collections are expected to be 80% in the month of sale, 19% in the month following the sale, and 1% uncollectible.
The cost of goods sold is 65% of sales.
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.
Other monthly expenses to be paid in cash are $20,300.
Monthly depreciation is $20,000.
Ignore taxes.
Balance sheet october 31
Assets
Accounts receivable, net allowance for uncollectible accounts $79,000
Merchandise inventory $101,400
Property, plant and equipment. net of $574,000 accumulated depreciation 1,082,000
Total Assets $1,289,400
Liabilities and Stockholders' Equity
Accounts payable $169,000
Common Stock 740,000
Retained Earnings 380,400
Total liabilities and stockholders' equity $1,289,400
1. The difference between cash receipts and cash disburesments for December would be:.
A. $55,800
B. $37,900
C. $93,700
D. $17,900
2. The net income for December would be:.
A. $60,200
B. $37,900
C. $40,200
D. $55,800
3. The cash balance at the end of December wuld be:.
A. $185,000
B. $153,500
C. $82,800
D. $27,000
4. The accounts receivable balance, net of uncollectible accounts, at the end of December would be:.
A. $46,000
B. $93,100
C. $43,700
D. $81,300
5. Accounts payable at the end of December would be:.
A. $81900
B. $141,700
C. $59,800
D. $149,500
6. Retained earnings at the end of December would be:.
A. $380,400
B $418,300
C. $471,300
D. $466,400

Dilbert Farm Supply

1. The difference between cash receipts and cash disbursements for December would be:.

A. $55,800

2. The net income for December would be:.

C. $40,200

3. The cash balance at the end of December would be:.

A. $185,000

B. $153,500

C. $82,800

D. $27,000

$176,550.

4. The accounts receivable balance, net of uncollectible accounts, at the end of December would be:.

C. $43,700

5. Accounts payable at the end of December would be:.

B. $141,700

6. Retained earnings at the end of December would be:.

C. $471,300

Explanation:

a)  Sales Budget        November       December       January

Sales                          $260,000         $230,000        $210,000

b) Collections:

80% month of sale   $208,000          $184,000         $168,000

19% following month  $75,050           $49,400           $43,700

Total collections      $283,050        $233,400          $211,700

c) Cost of goods sold   $169,000           $149,500        $136,500

d) Ending Inventory       $89,700            $81,900

e) Beginning Inventory $101,400           $89,700            $81,900

f) Purchases                $157,300           $141,700

g) Disbursements:

Payment purchases $169,000           $157,300           $141,700

Other expenses        $20,300            $20,300           $20,300

Total disbursement $189,300           $177,600          $162,000

h) Accounts Receivable           Nov.            Dec.

Beginning balance (net)    $75,050          $49,400

Credit Sales                    $260,000        $230,000

Collections                     ($283,050)      ($233,400)

Ending balance                 $52,000          $46,000

Uncollectibles                     $2,600            $2,300

Net of uncollectibles        $49,400          $43,700

i) Accounts Payable       Nov.                 Dec.

Beginning balance   $169,000          $157,300

Credit purchases     $157,300            $141,700

Payments               ($169,000)         ($157,300)

Ending balance       $157,300            $141,700

j) Difference between collections and disbursements:

                                  November       December       January

Total collections       $283,050         $233,400           $211,700

Total disbursement   $189,300          $177,600         $162,000

Difference                   $93,750           $55,800          $49,700

k) Income Statement

                                  November        December        January

Sales                          $260,000         $230,000        $210,000

Cost of goods sold    $169,000          $149,500        $136,500

Gross profit                  $91,000           $80,500          $73,500

Other expenses         $20,300            $20,300         $20,300

Depreciation               $20,000           $20,000         $20,000

Net Income                 $50,700            $40,200         $33,200

Retained Earnings   $380,400            $431,400        $471,300

Retained Earnings    $431,100            $471,300        $504,500

l) Cash balance

                                November        December          January

Beginning balance     $27,000          $120,750          $176,550

Total collections       $283,050         $233,400           $211,700

Total disbursement  $189,300          $177,600          $162,000

Ending balance        $120,750          $176,550         $226,250

m) Opening balance of Cash:

Total Assets                        $1,289,400

less stated assets              $1,262,400 ($79,000 + 101,400 + 1,082,000)

Difference = Cash balance = $27,000

rational decision making is a multi-step process for making choices between alternatives. the process of rational decision making favors logic, objectivity, and analysis over subjectivity and insight. the word “rational” in this context does not mean sane or clear-headed as it does in the colloquial sense.

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