The MacArthur Company is a retail sporting goods store. Facts regarding their operation are as follows:
- Sales are budgeted at $220,000 for November and $200,000 for December
- All sales are on credit. Accounts receivable are expected to be collected 60% in the month of the sale, 38% in the month following the sale, and 2% are expected to be uncollectable.
- The cost of goods sold is typically 75% of sales
- Purchases of merchandise to be sold in the store are typically made 80% in the month prior to the sale and 20% in the month of the sale. Payment for purchases is made in the month following the purchase.
- Other cash expenses amount to $22,600 per month
- Depreciation expenses average $18,000 per month
MacArthur Company:Balance Sheet
As of October 31, 2013
Assets Liabilities
Cash $ 22,000 Accounts payable $ 162,000
Accounts receivable 80,000
Allowance for bad debts (4,000) Shareholders' equity
Inventory 132,000 Common stock 800,000
Fixed assets (at cost) 1,550,000 Retained earnings 138,000
Accumulated depreciation (680,000) Total liabilities and
Total Assets $ 1,100,000 shareholders' equity $ 1,100,000
Required:
1.Calculate the budgeted cash collections for November.
2.Calculate the budgeted Net Income for November.
3.Calculate the projected balance in accounts payable as of November 30.
4.Calculate the projected balance for inventory as of November 30.