Caprice Corporation is a wholesaler of industrial goods. Data regarding the stor
ID: 2551289 • Letter: C
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 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.
Prepare a Schedule of Expected Cash Collections for November and December.
Prepare a Merchandise Purchases Budget for November and December. (Input all amounts as positive values.)
•
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.Explanation / Answer
(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%
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