The Bandeiras Corporation, a merchandising firm, has budgeted its activity for December according to the following information: Sales at $550,000, all for cash. Merchandise inventory on November 30 was $300,000. The cash balance at December 1 was $25,000. Selling and administrative expenses are budgeted at $60,000 for December and are paid in cash. Budgeted depreciation for December is $35,000. The planned merchandise inventory on December 31 is $270,000. The cost of goods sold is 75% of the sales price. All purchases are paid for in cash. There is no interest expense or income tax expense. The budgeted cash disbursements for December are:. a) $382,500 b) $442,500 c) $472,500 d) $477,500

b) $442,500

Explanation:

Sales at $550,000, all for cash.

Merchandise inventory on November 30 was $300,000.

The cash balance at December 1 was $25,000.

Selling and administrative expenses are budgeted at $60,000 for December and are paid in cash.

Budgeted depreciation for December is $35,000.

The planned merchandise inventory on December 31 is $270,000.

The cost of goods sold is 75% of the sales price.

All purchases are paid for in cash. There is no interest expense or income tax expense. The budgeted cash disbursements for December are:.

Beginning Cash Balance25,000

Sales ...550,000

Selling and admin(60,000)

Purchases* (see below)...(382,500)

Closing Cash balance132,500

To get purchases we use the formula: Opening stock + Purchases - closing stock = Cost of sales.

Opening stock is given as $300,000

Closing stock is given as $270,000

Cost of Sales is 75% of sales which is 0.75 x 550,000 = $412,500

Therefore purchases =  300,000 + Purchases - 270,000 = 412,500

Purchases = 412,500 - 300,000+270,000 = $382,500

Hence, the budgeted Cash disbursements = Purchases + Selling and Admin; 382,500 + 60,000 = 442,500

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