Reference no: EM133004300

Question - The Copper, Inc. is a retailer whose sales are all made on credit. Sales are billed twice monthly, on the 10th of the month for the last half of the prior month's sales and on the 20th of the month for the first half of the current month's sales. The terms of all sales are 2/10, net 30. Based on past experience, the collection experience of accounts receivable is as follows:

Within the discount period 80%

On the 30th day 18%

Uncollectible 2%

The sales value of shipments for May and the forecast for the next four months are:

May (actual) 700,000

June 800,000

July 900,000

August 900,000

September 600,000

The company's average markup on its products is 20% of the sales price. It also 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 sales. All purchases are on credit with terms of net 30. The company 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 the company collect from accounts receivable during July?

A. 801,400

B. 815,000

C. 842,600

D. 794,000

2. How much cash will be collected in September from sales made in August?

A. 441,000

B. 433,800

C. 400,400

D. 337,000

3. The budgeted peso value of inventory on August 31 will be

A. 150,000

B. 180,000

C. 130,000

D. 120,000

4. How much merchandise should the company plan to purchase during June?

A. 650,000

B. 620,000

C. 680,000

D. 660,000

5. The amount of payments for the month of August is:

A. 720,000

B. 780,000

C. 690,000

D. 660,000