Carver Lumber Sells Lumber and General Building Supplies to Building

Carver Lumber sells lumber and general building supplies to building contractors in a medium-sized town in Montana. Data regarding the store's operations follow:
o Sales are budgeted at $350,000 for November, $320,000 for December, and $300,000 for January.
o Collections are expected to be 90% in the month of sale and 10% in the month following the sale.
o The cost of goods sold is 75% of sales.
o The company desires to have an ending merchandise inventory equal to 60% of the following month's cost of goods sold. Payment for merchandise is made in the month following the purchase.
o Other monthly expenses to be paid in cash are $24,700.
o Monthly depreciation is $16,000.
o Ignore taxes.

-Retained earnings at the end of December would be:

A) $289,600
B) $296,000
C) $236,400
D) $203,500

Correct Answer:

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