7-29 Purchases and Sales Budgets All sales of Tracy's Jeans and Uniforms (TJU) are made on credit. Sales are billed twice monthly, on the fifth of the month for the last half of the prior month's sales and on the twentieth of the month for the first half of the current month's sales. For accounts paid within the first 10 days after the billing date, TJU gives customers a 2% discount; otherwise the full amount is due within 30 days of the billing date, and customers that do not pay within the 10-day discount period generally wait the full 30 days before making payment. Based on past experience, the collection experience of accounts receivable is as follows: Within the 10-day discount period 70% At 30 days after billing 28% Uncollectible 2% Sales for May 20X8 were $790,000. The forecast sales for the next 4 months are as follows: June $810,000 July 990,000 August 940,000 September 660,000 TJU's average markup on its products is 40% of the sales price. TJU purchases merchandise for resale to meet the current month's sales demand and to maintain a desired monthly ending inventory of 25% of the next month's cost of goods sold. All purchases are on credit. TJU pays for one-half of a month's purchases in the month of purchase and the other half in the month following the purchase. All sales and purchases occur uniformly throughout the month. 1. How much cash can TJU plan to collect from accounts receivable collections during July 20X8? 2. Compute the budgeted dollar value of TJU inventory on May 31, 20X8. 3. How much merchandise should TJU plan to purchase during June 20X8? 4. How much should TJU budget in August 20X8 for cash payments for merchandise purchased?
7-29 Purchases and Sales Budgets All sales of Tracy's Jeans and Uniforms (TJU) are made on credit. Sales are billed twice monthly, on the fifth of the month for the last half of the prior month's sales and on the twentieth of the month for the first half of the current month's sales. For accounts paid within the first 10 days after the billing date, TJU gives customers a 2% discount; otherwise the full amount is due within 30 days of the billing date, and customers that do not pay within the 10-day discount period generally wait the full 30 days before making payment. Based on past experience, the collection experience of accounts receivable is as follows: Within the 10-day discount period 70% At 30 days after billing 28% Uncollectible 2% Sales for May 20X8 were $790,000. The forecast sales for the next 4 months are as follows: June $810,000 July 990,000 August 940,000 September 660,000 TJU's average markup on its products is 40% of the sales price. TJU purchases merchandise for resale to meet the current month's sales demand and to maintain a desired monthly ending inventory of 25% of the next month's cost of goods sold. All purchases are on credit. TJU pays for one-half of a month's purchases in the month of purchase and the other half in the month following the purchase. All sales and purchases occur uniformly throughout the month. 1. How much cash can TJU plan to collect from accounts receivable collections during July 20X8? 2. Compute the budgeted dollar value of TJU inventory on May 31, 20X8. 3. How much merchandise should TJU plan to purchase during June 20X8? 4. How much should TJU budget in August 20X8 for cash payments for merchandise purchased?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:7-29 Purchases and Sales Budgets
All sales of Tracy's Jeans and Uniforms (TJU) are made on credit. Sales are billed twice monthly, on
the fifth of the month for the last half of the prior month's sales and on the twentieth of the month for
the first half of the current month's sales. For accounts paid within the first 10 days after the billing
date, TJU gives customers a 2% discount; otherwise the full amount is due within 30 days of the
billing date, and customers that do not pay within the 10-day discount period generally wait the full
30 days before making payment. Based on past experience, the collection experience of accounts
receivable is as follows:
Within the 10-day discount period
70%
At 30 days after billing
28%
Uncollectible
2%
Sales for May 20X8 were $790,000. The forecast sales for the next 4 months are as follows:
June
$810,000
July
990,000
August
940,000
September
660,000
TJU's average markup on its products is 40% of the sales price.
TJU purchases merchandise for resale to meet the current month's sales demand and to maintain
a desired monthly ending inventory of 25% of the next month's cost of goods sold. All purchases are
on credit. TJU pays for one-half of a month's purchases in the month of purchase and the other half
in the month following the purchase.
All sales and purchases occur uniformly throughout the month.
1. How much cash can TJU plan to collect from accounts receivable collections during July 20X8?
2. Compute the budgeted dollar value of TJU inventory on May 31, 20X8.
3. How much merchandise should TJU plan to purchase during June 20X8?
4. How much should TJU budget in August 20X8 for cash payments for merchandise purchased?
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