In: Accounting
BBTalk Company Limited sells tiles and other decoration products. Data of the store's operations are as follow:
• Sales are budgeted at $340,000 for November 2019, $320,000 for December 2019, and $330,000 for January 2020.
• Collections are expected to be 85% in the month of sale, 14% in the month following the sale, and 1% uncollectible will be recorded as bad debt expense.
• The cost of goods sold is 60% of sales.
•The company purchases 78% of its merchandise in the month prior to the month of sale and 22% in the month of sale. Payment for inventory is made in the month following the purchase.
• Depreciation is $20,200 per month.
• Other monthly expenses to be paid in cash are $18,000.
• Other information as at 31 Oct 2019:
Cash $42,000
Accounts receivable (net of allowance for uncollectible accounts)
$85,000
Accounts payable $218,000
• Ignore taxes.
Required:
a. Prepare a Schedule of Expected Cash Collection for November and December.
b. Prepare a Merchandise Purchases Budget for November and December.
c. Prepare a Cash Budget showing the captions with figures of beginning, excess/(deficiency), ending balance and so on for November and December.
d. Prepare an Income Statement Budget for November and December.