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

Question

Bryan Pastore · Accepted Answer

Final Answer : B, Explanation :  The budgeted cash disbursements for December can be calculated by adding up all the cash payments:- Cost of goods sold: $550,000 x 75% = $412,500- Add: Decrease in merchandise inventory: $300,000 - $270,000 = $30,000- Total merchandise purchases: $412,500 + $30,000 = $442,500- Add: Selling and administrative expenses: $60,000- Add: Depreciation: $35,000- Total cash disbursements: $442,500 + $60,000 + $35,000 = $537,500- Subtract: Cash receipts (sales): $550,000- Net cash disbursements: $537,500 - $550,000 = -$12,500- Add: Beginning cash balance: $25,000- Ending cash balance: -$12,500 + $25,000 = $12,500Therefore, the budgeted cash disbursements for December is $442,500.

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