New New Corporation is a wholesaler of industrial goods. Data regarding the stor

Question

New New 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, 10% in the month following the sale, and 5% uncollectible.

-The cost of goods sold is 80% of sales.

-The company purchases 40% of its merchandise in the month prior to the month of sale and 60% in the month of sale. 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.

1.    Please Prepare a schedule of expected cash collections for November and December.

2.    Please Prepare a merchandise purchases budget for November and December.

Explanation / Answer

  

1.Schedule of Expected cash Collections for New New Corporation S.No Particulars November December A Expected Sales - 390000 360000 B Expected Cash Collection during the month (Expected Sales*85%) 85% 3,31,500 306000 C Expected Cash Collection of the previous month (Expected Sale of Previous Month*10%) 10% 77000 39000 D Total expected cash collection during the month (B+C) - 4,08,500 345000 Note: It is assumed that the begining balance in acounts receivalbe i.e $77000               will be expected to be realised in the month of November

  

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