Question - The Alec Corporation sells inflatable pools. On June 30, there were 105 pools in ending inventory, and accounts receivable had a balance of $12,000. Sales of inflatable pools (in units) have been budgeted at the following levels for the upcoming months:
Accounts receivable, June 30 $12,000
Number of pools budgeted to be sold in July 350
Number of pools budgeted to be sold in August 420
Number of pools budgeted to be sold in September 370
Number of pools budgeted to be sold in October 300
The company has a policy that the ending inventory of inflatable pools should be equal to 30% of the number of pools to be sold in the following month. The Outdoor Leisure Store sells the inflatable pools for $100 each. The company's collection history shows that 30% 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:
a. Prepare a merchandise purchases budget showing how many pools should be purchased in each of the months including July, August, and September.
b. Prepare a cash collections budget for each of the months including July, August, and September.