Digital Ltd is a retailer of a popular digital watch and provides you with the following information for the preparation of its 1st quarter budget: July - September. Budgeted sales are as follows: Month Sales ($) Units sold May 250,000 2,500 June 280,000 2,800 July 350,000 3,500 August 400,000 4,000 September 300,000 3,000 October 360,000 3,600 Additional information: i) Purchases are budgeted at $5.00 per unit and are paid for in full in the month after purchase. ii) Ending inventory must equal 40% of of the next month's sales. v) Sales (which are all on credit) are collected as follows: 60% in the month of sale; 30% in the month after the sale; 5% in the second month after the sale. v) The balance in the bank account as at 30 June is $10,000. Required: a) Prepare a purchases budget (in units and $) for the 1st quarter. (Purchases are based on expected sales).

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Digital Ltd is a retailer of a popular digital watch and provides you with the following information for the preparation of its
1st quarter budget: July - September. Budgeted sales are as follows: Month Sales ($) Units sold May 250,000 2,500 June
280,000 2,800 July 350,000 3,500 August 400,000 4,000 September 300,000 3,000 October 360,000 3,600 Additional
information: i) Purchases are budgeted at $5.00 per unit and are paid for in full in the month after purchase. ii) Ending
inventory must equal 40% of of the next month's sales. v) Sales (which are all on credit) are collected as follows: 60% in the
month of sale; 30% in the month after the sale; 5% in the second month after the sale. v) The balance in the bank account as
at 30 June is $10,000. Required: a) Prepare a purchases budget (in units and $) for the 1st quarter. (Purchases are based on
expected sales).
Transcribed Image Text:Digital Ltd is a retailer of a popular digital watch and provides you with the following information for the preparation of its 1st quarter budget: July - September. Budgeted sales are as follows: Month Sales ($) Units sold May 250,000 2,500 June 280,000 2,800 July 350,000 3,500 August 400,000 4,000 September 300,000 3,000 October 360,000 3,600 Additional information: i) Purchases are budgeted at $5.00 per unit and are paid for in full in the month after purchase. ii) Ending inventory must equal 40% of of the next month's sales. v) Sales (which are all on credit) are collected as follows: 60% in the month of sale; 30% in the month after the sale; 5% in the second month after the sale. v) The balance in the bank account as at 30 June is $10,000. Required: a) Prepare a purchases budget (in units and $) for the 1st quarter. (Purchases are based on expected sales).
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