Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: Sales are budgeted at $300,000 for November, $320,000 for December, and $220,000 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 $22,100. Monthly depreciation is $26,000. Ignore taxes.

The balance sheet and the requirement are both missing from the question, find them in the attached:

December retained earnings is $375,200.00  

Explanation:

In order to calculate the retained earnings at the end of December, I started with sales projections for November,December and January,then deducted the cost of goods sold since it is 75% of sales in each month.

Thereafter,I deducted the other monthly expenses as well as the depreciation.

Finally  I added the net income for November and December to retained earnings in the balance sheet as the end of October, which gives retained earnings at the end of December.

Cash Budget                                     Nov                Dec            Jan

Receipts

Cash received from debtors           $210,000      $314,000    $250,000

Total Receipts                                  $210,000      $314,000    $250,000

Payments

Cash paid to Creditors                    -                    $237,000      $180,000

Other monthly expenses                $22,100        $22,100         $22,100

Total Payments                               $22,100        $259,100       $202,100

Cash surplus                                   $187,900      $54,900         $47,900

opening Cash                                  -                    $187,900        $242,800

Closing balance                           $187,900         $242,800      $290,700

Explanation:

The Question is incomplete but judging by its nature it requires Cash budget.

A Cash Budget is a statement used to determine cash flow over a period of time and also shows if a company has sufficient cash at the end of that given period.

Cash Collection schedule  credit sales        Nov                Dec              Jan  

November sales                $300,000  

collection : Nov 70%                                    210,000

                  Dec 30%                                                          90,000

December Sales               $320,000

Collection : Dec 70%                                                         224,000

                   Jan  30%                                                                             96,000

January Sales                  $220,000

                    Jan 70%                                                                            154,000

Total                                                           $210,000       $314,000    $250,000

  Cash Paid to creditors

                                       Credit Purchase   Nov             Dec           Jan

Nov purchase                 $237,000                              $237,000  

Dec Purchase                 $180,000                                                  $180,000

Purchase = cost of goods sold + closing inventory - opening inventory

               = ( sales *75%) + (Next month's cost of sales *80%) - (this months cost of sales * 80%)

e.g Nov purchases = (300,000*75%) + (320,000*75%*80%) - (300,000*75%*80%)

                              = 225,000 + 192,000 - 180,000

                              =$237,000

For Nov to have figures it needs the previous month's information and the question is incomplete.

Depreciation is a non cash item therefore is not included in this statement.

Closing Balance = surplus + opening

opening = previous month's closing balance

Surplus = receipts - payments

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answer; risk transference;