Reference no: EM132824291
Question - Owens Company is a merchandising company that sells a single product. The company's inventories, production, and sales in units for the next three months have been forecasted as follows:
|
Units
|
October
|
November
|
December
|
|
Beginning Inventory
|
10,000
|
10,000
|
10,000
|
|
Merchandise Purchases
|
60,000
|
70,000
|
35,000
|
|
Sales
|
60,000
|
70,000
|
40,000
|
|
Ending Inventory
|
10,000
|
10,000
|
5,000
|
Units are sold for $12 each. One fourth of all sales are paid for in the month of sale and the balance are paid for in the following month. Accounts receivable at September 30 totaled $450,000.
Merchandise is purchased for $7 per unit. Half of the purchases are paid for in the month of the purchase and the remainder are paid for in the month following purchase. Marketing and administrative expenses are expected to total $120,000 each month. One half of these expenses will be paid in the month in which they are incurred and the balance will be paid in the following month. There is no depreciation. Accounts payable at September 30 totaled $290,000.
Cash at September 30 totaled $80,000. A payment of $300,000 for purchase of equipment is scheduled for November, and a dividend of $200,000 is to be paid in December.
Required -
1) Determine cash collections of October, November, and December.
2) Determine cash payments for merchandise purchases and marketing and administrative expenses of October, November, and December.