Question

Caprice Corporation is a wholesaler of industrial goods. Data regarding the store's operations follow:

•	Sales are budgeted at $450,000 for November, $460,000 for December, and $440,000 for January.
•	Collections are expected to be 50% in the month of sale, 48% in the month following the sale, and 2% uncollectible.
•	The cost of goods sold is 75% of sales.
•	The company desires an ending merchandise inventory equal to 30% of the following month's cost of goods sold. Payment for merchandise is made in the month following the purchase.
•	The November beginning balance in the accounts receivable account is $80,000.
•	The November beginning balance in the accounts payable account is $267,000.

Required:

a.	Prepare a Schedule of Expected Cash Collections for November and December.

      

b.	Prepare a Merchandise Purchases Budget for November and December. (Input all amounts as positive values.)

      

Answer 1

(a)Schedule of Expected Cash Collections for November and December.

November December

Sales $ 450000 $ 460000

Accounts Receivable $ 80000

November Sales ............ $ 225000* $ 216000

December Sales ........... .............. ..... $ 230000

Total Cash Collections..                            $ 305000    $ 446000

*(450000 x 50%)

**(450000*48%)

(b) Merchandise Purchases Budget for November and December.

November December

Cost of Goods Sold $ 337500    $ 330000*

Add: Desired End. Mer. Inventory $ 103500** $ 99000***

Total Needs $ 441000    $ 429000

Less: Beg. Merchandise Inventory $ 101250    $ 103500

Required Purchases $ 339750    $ 325500

*($ 440000 * 75%)

**($ 460000*.75 * 30%)

***(440000*75%*30%)

****$262500*40%