Question

15.

Capes Corporation is a wholesaler of industrial goods. Data regarding the store's operations follow: • Sales are budgeted at $470,000 for November, $480,000 for December, and $460,000 for January. • Collections are expected to be 60% in the month of sale and 40% in the month following the sale. The cost of goods sold is 70% of sales. • The company desires an ending merchandise inventory equal to 40% of the cost of goods sold in the following month. Payment for merchandise is made in the month following the purchase. • The November beginning balance in the accounts receivable account is $82,000. • The November beginning balance in the accounts payable account is $269,000. Required: a. Prepare a Schedule of Expected Cash Collections for November and December. b. Prepare a Merchandise Purchases Budget for November and December.

Answer 1

Answer
a) Schedule of Expected Cash Collections:
	November	December
Sales	$      470,000	$      480,000
Schedule of expected cash collections:
Accounts Receivable	$        82,000
November Sales ($470,000*60/100); ($470,000*40/100)	$      282,000	$      188,000
December Sales ($480,000*60/100)		$      288,000
Total cash collections	$      364,000	$      476,000
b) Merchandise Purchases Budget:
	November	December
Cost of Goods Sold ($470,000*70/100); ($480,000*70/100)	$      329,000	$      336,000
Add: Desired ending inventory ($329,000*40/100); ($336,000*40/100)	$      131,600	$      134,400
Total Needs	$      460,600	$      470,400
Less: Beginning Inventory (Last month's ending inventory will be the beginning inventory for current month)	$               -	$      131,600
Required purchases	$      460,600	$      338,800