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  #1 ()
: Capp Corporation is a wholesaler of industrial goods. Data regarding the store's operations follow:

Sales are budgeted at $280,000 for November, $310,000 for December, and $270,000 for January. Collections are expected to be 70% in the month of sale, 25% in the month following the sale, and 5% uncollectible.
The cost of goods sold is 65% of sales.
The company desires an ending merchandise inventory equal to 45% 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 $50,000.
The November beginning balance in the accounts payable account is $235,000.



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

b. Prepare a Merchandise Purchases Budget for November and December.
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  #2 ()
: a. Prepare a Schedule of Expected Cash Collections for November and December.
....... ...... ....... ........... November ...December
Sales...... ......... ......... $280,000 ....$310,000

Schedule of expected Cash collections:
Accounts Receivable .......50,000
November sales ..... ......196,000* ....70,000**
December sales ...... ........ ........ ....217,000
Total cash collections ...$$246,000..$287,000

*(280,000 x 70%)
**(280,000 x 25%)

b. Prepare a Merchandise Purchases Budget for November and December.
....... ...... ....... ........... November ...December
Cost of Goods Sold ......$182,000 ...$201,500 ($280,000 x 65%; $310,000 x 65%)
Add: Desired ending MI.....90,675........78,975 (201,500 x 45%; 270,000 x 65% x 45%)
Total needs ...... ....... .....272,675 .....280,475
Less: Beginning MI .......... 81,900 ...... 90,675 ($182,000 x 45%; 201,500 x 45%)
Required purchases .......$190,775 ...$189,800
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