Solution for in-class exercise_March 23_Nordic Company

# Solution for in-class exercise_March 23_Nordic Company -...

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Unformatted text preview: Solution for in-class exercise, Nordic Company, March 23 As of March 31 (the end of the prior quarter), the company's balance sheet showed the following account balances: Actual sales for December and budgeted sales for January-April are as follows: March (actual) April May June July Sales \$60,000 \$70,000 \$85,000 \$90,000 \$50,000 Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following the sale. The accounts receivable of \$48,000 at March 31 are a result of March credit sales. 1.Schedule of expected cash collections: April May June Quarter Cash sales........... \$14,000 85,000 x 20% 90,000 x 20% 49,000 Credit sales.......... 48,000 70,000x 80% 85,000 x 80% 172,000 Total collections.... \$62,000 \$73,000 \$86,000 \$221,000 1 Nordic Company (cont’d) Ma rch (actual) April May June July Sales \$60,000 \$70,00 \$85,000 \$90,000 \$50,0 00 The company's gross margin percentage is 40% of sales. In other words, cost of goods sold is 60% of sales. Each month's ending inventory should equal 30% of the following month's cost of goods sold. 2. a. Merchandise purchases budget: April May June Quarter Budgeted cost of goods sold (60% of sales).................... \$42,000 \$51,000 90,000 x 60% =54,000 147,000 Add desired ending inventory............................ 15,300 54,000 x 30% (50,000 x 60%) x 30%=9,000 9,000 Total needs........................... 57,300 67,200 63,000 156,000 Less beginning inventory...... 12,600 15,300 16,200 12,600 2 Required purchases............. \$44,700 \$51,900 46,800 143,400...
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Solution for in-class exercise_March 23_Nordic Company -...

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