Elon Co.'s September balance sheet contains the following information: $ 73,500 (dr 252,000 (dr 4,800 (cr 33,250 (dr) Cash Accounts receivable. Allowance for doubtful accounts Merchandise inventory hs Management has designated $71,000 as the firm's minimum monthly cash balance. Other information about the firm and its operations is as follows: a. Sales revenues of $710,000, $840,000, and $622,500 are expected for October, November, and December, respectively. All goods are sold on account. b. The collection pattern for accounts receivable is 60% in the month of sale, 39% in the month following the month of sale, and 1% uncollectible, which is set up as an allowance. c. Cost of goods sold is 60% of sales revenues. d. Management's target ending balance of merchandise inventory is 10% of the current month's budgeted cost of goods sold. e. All accounts payable for inventory are paid in the month of purchase. f. Other monthly expenses are $94,250, which includes $6,500 of depreciation and 4,000 of bad debt expense. g. In the event of a shortfall, the company borrows money. In contrast, in the event of excess cash, the company invests in short-term investments. Borrowings and investments are assumed to be made at the end of a month in increments of $11,800. h. Interest on borrowings is 10% per year, payable every quarter, on the accumulated amount of the loan, similarly, interest earned on investments is 8% per year on the accumulated investments and is received every quarter. Investments can be matured and the principal amount redeemed in June or December of a year. Required: 1. Prepare a merchandise purchases budget for October and November. Total needs Elon Co Merchandise Purchases Budget October November
Elon Co.'s September balance sheet contains the following information: $ 73,500 (dr 252,000 (dr 4,800 (cr 33,250 (dr) Cash Accounts receivable. Allowance for doubtful accounts Merchandise inventory hs Management has designated $71,000 as the firm's minimum monthly cash balance. Other information about the firm and its operations is as follows: a. Sales revenues of $710,000, $840,000, and $622,500 are expected for October, November, and December, respectively. All goods are sold on account. b. The collection pattern for accounts receivable is 60% in the month of sale, 39% in the month following the month of sale, and 1% uncollectible, which is set up as an allowance. c. Cost of goods sold is 60% of sales revenues. d. Management's target ending balance of merchandise inventory is 10% of the current month's budgeted cost of goods sold. e. All accounts payable for inventory are paid in the month of purchase. f. Other monthly expenses are $94,250, which includes $6,500 of depreciation and 4,000 of bad debt expense. g. In the event of a shortfall, the company borrows money. In contrast, in the event of excess cash, the company invests in short-term investments. Borrowings and investments are assumed to be made at the end of a month in increments of $11,800. h. Interest on borrowings is 10% per year, payable every quarter, on the accumulated amount of the loan, similarly, interest earned on investments is 8% per year on the accumulated investments and is received every quarter. Investments can be matured and the principal amount redeemed in June or December of a year. Required: 1. Prepare a merchandise purchases budget for October and November. Total needs Elon Co Merchandise Purchases Budget October November
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Elon Co.'s September balance sheet contains the following information:
$ 73,500 (dr
252,000 (dr
4,800 (cr
33,250 (dr)
Cash
Accounts receivable.
Allowance for doubtful accounts
Merchandise inventory
hs
Management has designated $71,000 as the firm's minimum monthly cash balance. Other information about the firm and its operations
is as follows:
a. Sales revenues of $710,000, $840,000, and $622,500 are expected for October, November, and December, respectively. All goods
are sold on account.
b. The collection pattern for accounts receivable is 60% in the month of sale, 39% in the month following the month of sale, and 1%
uncollectible, which is set up as an allowance.
c. Cost of goods sold is 60% of sales revenues.
d. Management's target ending balance of merchandise inventory is 10% of the current month's budgeted cost of goods sold.
e. All accounts payable for inventory are paid in the month of purchase.
f. Other monthly expenses are $94,250, which includes $6,500 of depreciation and 4,000 of bad debt expense.
g. In the event of a shortfall, the company borrows money. In contrast, in the event of excess cash, the company invests in short-term
investments. Borrowings and investments are assumed to be made at the end of a month in increments of $11,800.
h. Interest on borrowings is 10% per year, payable every quarter, on the accumulated amount of the loan, similarly, interest earned on
investments is 8% per year on the accumulated investments and is received every quarter. Investments can be matured and the
principal amount redeemed in June or December of a year.
Required:
1. Prepare a merchandise purchases budget for October and November.
Total needs
Elon Co
Merchandise Purchases Budget
October November
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