Question - Welnor Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow:
• Sales are budgeted at $320,000 for November, $340,000 for December, and $330,000 for January.
• Collections are expected to be 75% in the month of sale, 20% in the month following the sale, and 5% uncollectible.
• The cost of goods sold is 65% of sales.
• The company desires ending merchandise inventory to equal 80% of the following month's cost of goods sold. Payment for merchandise is made in the month following the purchase.
• Other monthly expenses to be paid in cash are $21,000.
• Monthly depreciation is $16,000.
• Ignore taxes.
Statement of Financial Position October 31
Assets
Cash $22,000
Accounts receivable (net of allowance for uncollectible accounts) 82,000
Merchandise inventory 166,400
PP&E (net of $658,000 accumulated depreciation) 1,170,000
Total Assets $1,440,400
Liabilities & Stockholders' Equity
Accounts payable $199,000
Common stock 840,000
Retained earnings 401,400
Total liabilities & stockholders' equity $1,440,400
Required: Prepare a Merchandise Purchases Budget for November and December.