Capes Corporation: Cash flow budget
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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.
Required:
a. Prepare a Schedule of Expected Cash Collections for November and December.
b. Prepare a Merchandise Purchases Budget for November and December.
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Solution Summary
The solution explains how to prepare the cash flow budget and merchandise purchase budget for Capes Corporation.
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(a) Schedule of expected cash collections
Month November December January
Sales 390,000 360,000 340,000
Collection (Nov ...
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