The following data have been taken from the budget reports of Sequioia Company, a merchandising company, which purchases merchandise inventory and sells to customers. The information on the sales to customers and the purchase of the inventory is given below:
January : Sales : 100,000 Purchases : 160,000
February : Sales : 200,000 Purchases : 160,000
March : Sales : 240,000 Purchases : 160,000
April : Sales : 280,000 Purchases : 154,000
May : Sales : 260,000 Purchases : 140,000
Additional Information :
The % of purchases paid for cash at the time of purchase : 40%
The % of purchases paid in the next month after purchase : 30%
The % of purchases paid in the second month after purchase : 30%
Purchases for November and December in the previous year : $150,000 per month
The Cost of Goods Sold is 60% of sales
Collections are expected as follows : 60% in month of sale, 40% in month following the sale
Employee wages are 10% of sales for the month in which the sales occur and are paid during the month
Other administrative expenses are 20% of the following month's sales and the entire amount is paid during the current month. The amount includes depreciation expense for the office equipment of $13,000.
Interest payments of $2,100 are paid quarterly in January and April (monthly interest is $700).
Sequoia is planning to declare cash dividends in April to be paid in May : $10,000
The balance in retained earnings is expected to be $210,000 on March 31.
Question 1) Cash disbursements for the month of April would be?
A) 215,200 B) 75,200 C) 157,600 D) 226,700 E) None
Question 2) What would be expected balance in Retained Earnings as of April 30th?
A) 275,600 B) 231,300 C) 241,300 D) 242,000 E) None