Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A merchandising firm by the name of Star Wars Enterprises, had an inventory of 49,000 units on March 31, and it had gross accounts receivable

A merchandising firm by the name of Star Wars Enterprises, had an inventory of 49,000 units on March 31, and it had gross accounts receivable totaling $88,500. Sales, in units, have been budgeted as follows for the next four months:

April

54,000

May

65,000

June

89,000

July

85,000

To be enforced in April, Star Wars board of directors has established a policy that states that the inventory at the end of each month should contain 40% of the units required for the following month's budgeted sales. The purchase price is $1.78, and the company receives 5% discount for any quantity =<50,000 and 10% for the incremental quantity over 50,000.

$3.25 is the selling price per unit. One-Quarter of sales are paid for by customers in the month of the sale; the balance is collected in the following month. The company gives 3% discount for payment in the same month and 2% the following month when it is paid

Required:

  1. Prepare a merchandise purchases budget showing how many units should be purchased and the dollar value for

each of the months April, May, and June (show the average price paid per unit) (8 marks)

2. Prepare a schedule of expected cash collections for each of the months April, May, and June. (8 marks)

3. Compute the discount the company gave to its customers for each of the month April, May and June? (4 marks) (part 2 & 3 may be combined)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Michelle Hanlon, Robert Magee, Glenn Pfeiffer, Thomas Dyckman

5th Edition

1618531654, 9781618531650

More Books

Students also viewed these Accounting questions

Question

e. What age client does the person see?

Answered: 1 week ago