4. (34 points) Nutt Corporation is a wholesaler of industrial goods. Data regard

Question

4. (34 points) Nutt Corporation is a wholesaler of industrial goods. Data regarding the store's operations follow: Sales are budgeted at $300,000 for November and $400,000 for December. Collections are expected to be 70% in the month of sale and 30% in the month following the sale. The cost of goods sold is 75% of sales. The company desires an ending merchandise inventory equal to 25% of the next month's cost of · goods sold. The beginning balance for accounts receivable was $60,000 for November. Required: a. What is the expected cost ofgoods sold for November? SDOSK 35% b. What is the expected cost ofgoods sold for December i 0,/ ox35% 78 What is the expected ending inventory for November? 3 >,o PX z5vo d. What is the expected cash collections for November? e. What is the expected cash collections for December? f. What is the expected accoupts receivable balance for the end of December? 225 ooJ 3cc,oo : go, 2 731 21

Explanation / Answer

A Expected cost of goods sold for November = 300000*75%= $225000 B Expected cost of goods sold for December = 400000*75%= $300000 C Expected ending inventory for November = 300000*25%= $75000 D Expected cash collections for November=60000+(300000*70%)= $270000 E Expected cash collections for December=(300000*30%)+(400000*70%)= $370000 F Expected Accounts Receivable balance at December end = 400000*30% = $120000

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