Young Co. has budgeted its activity for December according to the following information:
1) Sales at $600000 all for cash.
2) Budgeted depreciation for December is $15000.
4) The cash balance at December 1 was $15000.
5) Selling and administrative expenses are budgeted at $60000 for December and are paid for in cash.
6) The planned merchandise inventory on December 31 and December 1 is $18000.
7) The invoice cost for merchandise purchases represents 75% of the sales price. All purchases are paid in cash.
How much are the budgeted cash disbursements for December?

A) $345000
B) $510000
C) $525000
D) $492000

Question

brooke laska · Accepted Answer

Final Answer : B, Explanation :  To calculate the budgeted cash disbursements for December, we need to consider the following expenses:1) Cost of merchandise purchases:- Sales = $600,000- Invoice cost for merchandise purchases represents 75% of the sales price, so merchandise purchases = 75% x $600,000 = $450,0002) Depreciation: $15,0003) Selling and administrative expenses: $60,0004) Increase in merchandise inventory: $18,000Therefore, the total budgeted cash disbursements for December are:Cost of merchandise purchases + Depreciation + Selling and administrative expenses + Increase in merchandise inventory = $450,000 + $15,000 + $60,000 + $18,000 = $543,000However, this calculation doesn't take into account the fact that the company had a cash balance of $15,000 at the beginning of December. Since this cash balance can be used to offset some of the cash disbursements, we need to subtract it from the total budgeted cash disbursements.Total budgeted cash disbursements - Cash balance at December 1 = $543,000 - $15,000 = $528,000Therefore, the correct answer is B) $510,000.

Definitions

Learning Objectives

Learning Objectives

Related questions