Prepare a Merchandise Purchases Budget for November and December.

Caprice Corporation is a wholesaler of industrial goods. Data regarding the store”s operations follow:

Sales are budgeted at $350,000 for November, $320,000 for December, and $300,000 for January.

Collections are expected to be 80% in the month of sale, 16% in the month following the sale, and 4% uncollectible.

The cost of goods sold is 70% of sales.

The company purchases 60% of its merchandise in the month prior to the month of sale and 40% in the month of sale. Payment for merchandise is made in the month following the purchase.

The November beginning balance in the accounts receivable account is $78,000.

The November beginning balance in the accounts payable account is $254,000.

Required:

a. Prepare a Schedule of Expected Cash Collections for November and December.

b. Prepare a Merchandise Purchases Budget for November and December.