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

Question

Western Corporation is a wholesaler of industrial goods. Data regarding the store's operations follow: Sales are budgeted at $330,000 for November, $340,000 for December, and $320,000 for January . Collections are expected to be 60% in the month of sale and 40% 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 $68,000. The November beginning balance in the accounts payable account is $255,000. Required: a. Prepare a Schedule of Expected Cash Collections for November and December. Show each month individually. b. Prepare a Merchandise Purchases Budget for November and December. Show each month individually.

Explanation / Answer

a) Schedule of expected cash collection :

b) Merchandise purchase budget :

November December Account receivable 68000 November sales 198000 132000 December sales 204000 Total cash colletion 266000 336000

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