Question - Capp Corporation is a wholesaler of industrial goods. Data regarding the store's operations follow:
- Sales are budgeted at $350,000 for November, $360,000 for December, and $340,000 for January.
- Collections are expected to be 60% in the month of sale, 39% in the month following the sale, and 1% uncollectible.
- The cost of goods sold is 75% of sales.
- The company desires an ending merchandise inventory equal to 40% of the following month's cost of goods sold. Payment for merchandise is made in the month following the purchase.
- The November beginning balance in the accounts receivable account is $70,000.
- The November beginning balance in the accounts payable account is $257,000.
Required:
a. Prepare a Schedule of Expected Cash Collections for November and December.
b. Prepare a Merchandise Purchases Budget for November and December.