Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: Sales are budgeted at $290,000 for November, $310,000 for December, and $210,000 for January.
Collections are expected to be 65% in the month of sale and 35% in the month following the sale.
The cost of goods sold is 80% of sales.
The company desires to have an ending merchandise inventory at the end of each month equal to 70% 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 $21,100.
Monthly depreciation is $21,000.
Ignore taxes.
Balance SheetOctober 31Assets Cash$25,000Accounts receivable 77,000Merchandise inventory 162,400Property, plant and equipment, net of $624,000 accumulated depreciation 1,026,000Total assets$1,290,400 Liabilities and Stockholders' Equity Accounts payable$239,000Common stock 740,000Retained earnings 311,400Total liabilities and stockholders' equity$1,290,400 The difference between cash receipts and cash disbursements for December would be:
A. $19,200
B. $13,700
C. $46,600
D. $38,700
Answer: D
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