Capes Corporation is a wholesaler of industrial goods. Data regarding the store\

Question

Capes Corporation is a wholesaler of industrial goods. Data regarding the store's operations follow: 9 Sales are budgeted at $230,000 for November, $240,000 for December, and $220,000 for January. Collections are expected to be 50% in the month of sale and 50% in the month following the sale. The cost of goods sold is 80% of sales. . ·The company desires an ending merchandise inventory equal to 30% 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 $58,000 The November beginning balance in the accounts payable account is $245,000 Required: a. Prepare a Schedule of Expected Cash Collections for November and December. b. Prepare a Merchandise Purchases Budget for November and December.

Explanation / Answer

Solution:(A): Schedule of expected cash collection:

(230000*50%). 115,000

Solution:(B): Merchandise Purchase Budget:

(230000*80%)

184,000

(240000*80%)

192,000

(192000*30%)

57,600

(220000*80%*30%)

52,800

(184000*30%)

55,200

(192000*30%)

57,600

Particulars November ($) December ($) Sales 230,000 240,000 Schedule of expected cash collections: Accounts receivable 58,000 ------- November sales

(230000*50%). 115,000

115,000 December sales ------ 120,000 Total cash collection 173,000 235,000

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