Answer and Explanation:
a. The preparation of Schedule of Expected Cash Collections for November and December is shown below:-
Schedule of Expected Cash Collections
for the month of November and December
Particulars November December
Accounts receivable $63,000
Sales $280,000 $290,000
Expected cash collection
in the month of sale 60%
collection $168,000 $112,000
($280,000 × 60%) ($280,000 × 40%)
Next month 40%
cash collection $174,000
($290,000 × 60%)
Total cash collection $231,000 $286,000
b. The Preparation of Merchandise Purchases Budget for November and December is shown below:-
Particulars November December January
Cost of goods sold a
(80% of sale) $224,000 $232,000 $216,000
($280,000 × 80%) ($290,000 × 80%) ($270,000 × 80%)
Add: Ending
inventory b $92,800 $86,400
($232,000 × 40%) ($216,000 × 40%)
Total inventory $316,800 $318,400
(c = a + b)
Less: Opening inventory d $89,600 $92,800
($224,000 × 40%)
Material to be
purchased $227,200 $225,600
(e = c - d)
