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Capes Corporation: Cash flow budget

Capes 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.


a. Prepare a Schedule of Expected Cash Collections for November and December.
b. Prepare a Merchandise Purchases Budget for November and December.

Solution Preview

Please see the attached file

(a) Schedule of expected cash collections
Month November December January
Sales 390,000 360,000 340,000
Collection (Nov ...

Solution Summary

The solution explains how to prepare the cash flow budget and merchandise purchase budget for Capes Corporation.