Question

4. (7 points) Map Corporation is a wholesaler of industrial goods. Data regarding the store's operations follow: • Sales are budgeted at $390,000 for November, $360,000 for December, and $340,000 for January. • Collections are expected to be 85% in the month of sale and 15% in the month following the sale. • The cost of goods sold is 80% 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 $77,000. The November beginning balance in the accounts payable account is $320,000. 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

a.

	November	December
Collection from same month sale	390000*0.85 = 331500	360000*0.85 = 306000
Collection from last month sale	77000	390000*0.15 = 58500
Expected cash collection	$408,500	$364500

b.

	November	December
Cost of goods sold	390000*0.80 = 312000	360000*0.80 = 288000
Less: Beginning inventory	312000*0.4 = 124800	115200
Add: Ending inventory	288000*0.4 = 115200	340000*0.8*0.4 = 108800
Merchandise purchase budget	302400	281600