In Chapter 9, Question 14 (2a) it asks us to prepare a merchandise purchases bud
ID: 2423292 • Letter: I
Question
In Chapter 9, Question 14 (2a) it asks us to prepare a merchandise purchases budget for July, August, and September, while also computing a total merchandise purchases for the quarter ended September 30th. Would you please help?
additional assumptions and estimates included in the problem:
Estimated sales for July August September and October will be 200,000, 220,000, 210,000, and 230,000 respectively all sales are on credit and all credit sales are collected. each months credit sales are collected 30% in the month of sale and 70% in the month following the sale. all of the accounts receivable at june 30 will be collected in july
Colerain Corporation Balance Sheet - June 30 Assets: Cash 80,000 Accounts Receivable 126,000 Inventory 52,000 Plant and equipment, net of depreciation 200,000 Total Assets: 458,000 Liabilities and Stockholders' Equity Accounts Payable 61,100 Common Stock 300,000 Retained Earnings 96,900 Total Liabilities and stockholders equity 458,000
monthly selling and administrative expenses are always 65,000. each month 5,000 of this total amount is depreciation expense and the remaining 60,000 relates to expenses that are paid in the month they are incurred
each months ending inventory must equal 40% of the cost of next months sales. the cost of goods sold is 65% of sales. the company pays for 50% of its merchandise purchases in the month of the purchase and the remaining 50% in the month following the purchase. all of the accounts payable at june 30 will be paid in july.
the company does not plan to borrow money or pay or declare dividends during the quarter ended September 30. the company does not plan to issue any common stock or repurchase its own stock during the quarter ended September 30.
Explanation / Answer
Solution:
Merchandise Purchase Budget July August September Estimated Sales 200,000 220,000 210,000 Cost of goods sold - 65 % of sales 130,000 143,000 136,500 Add: Ending Inventory 57,200 54,600 92,000 Less: Beginning Inventory 52,000 57,200 54,600 Purchases 135,200 140,400 173,900