Solution-Prepare a schedule of expected cash collection

Prepare a schedule of expected cash collection from sales

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Reference no: EM132753434

Question - Wonderful Technology Company Limited sells computers and accessories. Data of the store's operations are as follow:

Sales are budgeted at $400,000 for December 2019, $420,000 for January 2020, and $410,000 for February 2020.

Collections are expected to be 80% in the month of sale, 18% in the month following the sale, and 2% uncollectible will be recorded as bad debt expense.

The cost of goods sold is 58% of sales.

The company purchases 70% of its merchandise in the month prior to the month of sale and 30% in the month of sale. Payment for inventory is made in the month following the purchase.

Other monthly expenses to be paid in cash are $16,000.

Depreciation is $18,000 per month.

Other information as at 30 Nov 2019:

Accounts receivable (net of allowance for uncollectible accounts) $76,000

Cash $49,000

Accounts payable $190,000

Ignore taxes.

There are inventories at end of November.

Required -

a. Prepare a Schedule of Expected Cash Collection from sales for December 2019 and January 2020.

bi. Prepare a Merchandise Purchases Budget for December 2019 and January 2020.

bii. Find the disbursements for merchandise for Dec 2019 and Jan 2020.

Reference no: EM132753434

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Prepare a schedule of expected cash collection from sales

Reference no: EM132753434

Reference no: EM132753434

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