Capp Corporation is a wholesaler of industrial goods. Data regarding the store\'
ID: 2482400 • Letter: C
Question
Capp Corporation is a wholesaler of industrial goods. Data regarding the store's operations follow:
Sales are budgeted at $290,000 for November, $300,000 for December, and $280,000 for January.
Collections are expected to be 55% in the month of sale, 44% in the month following the sale, and 1% uncollectible.
The company desires an ending merchandise inventory equal to 35% 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 payable account is $251,000.
a.
Prepare a Schedule of Expected Cash Collections for November and December. (Omit the "$" sign in your response.)
b.
Prepare a Merchandise Purchases Budget for November and December. (Input all amounts as positive values. Omit the "$" sign in your response.)
•Sales are budgeted at $290,000 for November, $300,000 for December, and $280,000 for January.
•Collections are expected to be 55% in the month of sale, 44% in the month following the sale, and 1% uncollectible.
• The cost of goods sold is 75% of sales. •The company desires an ending merchandise inventory equal to 35% 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 $64,000. •The November beginning balance in the accounts payable account is $251,000.
Explanation / Answer
a) expected cash collection November December Sale in each month 290000 300000 cash collection- 55 % current month sale 159500 165000 cash collection- Previous month sale 64000 127600 = 44 % of prvious month sale Total collection 223500 292600 For November we are given opening balance of accounts receivables as 64000 b) Merchandise Purchase budget November December January Sale in each month 290000 300000 280000 Cost of Goods sold = 75 % of sales 217500 225000 210000 Add: closing stock, 35 % of next month COGS 78750 73500 Stock required for month 296250 298500 Less: Opening stock 76125 78750 73500 Material required to be purchased 220125 219750 Closing stock should be equal to next 35 % of next months Cost of Goods sold. For October closing stock would have been 35 % of 217500 ( November COGS) = 76125
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