Question

Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: Sales are budgeted at $306,000 for November, $326,000 for December, and $226,000 for January. Collections are expected to be 70% in the month of sale and 30% in the month following the sale. The cost of goods sold is 75% of sales. The company desires to have an ending merchandise inventory at the end of each month equal to 80% 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 $22,700. Monthly depreciation is $29,000. Ignore taxes. Balance Sheet October 31 Assets Cash $ 34,500 Accounts receivable 85,000 Merchandise inventory 183,600 Property, plant and equipment, net of $624,000 accumulated depreciation 921,000 Total assets $ 1,224,100 Liabilities and Stockholders' Equity Accounts payable $ 255,000 Common stock 756,000 Retained earnings 213,100 Total liabilities and stockholders' equity $ 1,224,100 Accounts payable at the end of December would be:

Answer 1

Answer:

Accounts payable at the end of December would be $184,500

Explanation:

In order to calculate the Accounts payable at the end of December we would have to calculate the following formula as follows:

Accounts payable at the end of December=cost of goods sold+ Desired ending inventory- Beginning inventory

cost of goods sold=Sales×percentage of cost of goods sold

cost of goods sold=$326,000×75%

cost of goods sold=$244,500

Desired ending inventory=$226,000*75%*80%

Desired ending inventory=$135,600

Beginning inventory=$244,500*80%

Beginning inventory=$195,600

Therefore, Accounts payable at the end of December=$244,500+$135,600  - $195,600

Accounts payable at the end of December=$184,500

Accounts payable at the end of December would be $184,500