The Elliot Corporation sells hammocks. On June 30, there were 70 hammocks in ending inventory and accounts receivable had a balance of $12,000. Sales of hammocks (in units) have been budgeted at the following levels for the upcoming months:

The company has a policy that the ending inventory of hammocks should be equal to 20% of the number of hammocks to be sold in the following month. The Outdoor Leisure Store sells the hammocks for $100 each. The company's collection history shows that 40% of the sales in a month are paid for by customers in the month of sale, while the remainder is collected in the following month.
Required:
1. Prepare a merchandise purchases budget showing how many hammocks should be purchased in each of the months including July, August, and September.
2. Prepare a cash collections budget for each of the months including July, August, and September.

Question

The Elliot Corporation sells hammocks. On June 30, there were 70 hammocks in ending inventory and accounts receivable had a balance of $12,000. Sales of hammocks (in units) have been budgeted at the following levels for the upcoming months:
 
 The company has a policy that the ending inventory of hammocks should be equal to 20% of the number of hammocks to be sold in the following month. The Outdoor Leisure Store sells the hammocks for $100 each. The company's collection history shows that 40% of the sales in a month are paid for by customers in the month of sale, while the remainder is collected in the following month.
Required:
1. Prepare a merchandise purchases budget showing how many hammocks should be purchased in each of the months including July, August, and September.
2. Prepare a cash collections budget for each of the months including July, August, and September.

Quizplus · Accepted Answer

The Answer of The Elliot Corporation sells hammocks. On June 30, there were 70 hammocks in ending inventory and accounts receivable had a balance of $12,000. Sales of hammocks (in units) have been budgeted at the following levels for the upcoming months:
 
 The company has a policy that the ending inventory of hammocks should be equal to 20% of the number of hammocks to be sold in the following month. The Outdoor Leisure Store sells the hammocks for $100 each. The company's collection history shows that 40% of the sales in a month are paid for by customers in the month of sale, while the remainder is collected in the following month.
Required:
1. Prepare a merchandise purchases budget showing how many hammocks should be purchased in each of the months including July, August, and September.
2. Prepare a cash collections budget for each of the months including July, August, and September.

The Elliot Corporation Sells Hammocks