CAPE Accounting Unit 2 · 2011 · Paper 2 · Question 3(b)(ii)

Philmore Inc. provides monthly sales: Nov 2010 (Actual) 100 000, Dec 2010 (Actual) 150 000, Jan 2011 (Forecasted) 175 000, Feb 2011 160 000, Mar 2011 120 000. Cash collection: 30% month of sale, 50% next month, 18% month following, 2% uncollected. COGS = 60% of sales. Desired ending inventory = 20% of next month's sales. Inventory on hand at Dec 31, 2010 = 35 000. Payment pattern: 40% in month of purchase, 60% in following month. Accounts payable at Dec 31, 2010 = 55 800. Additional Jan 2011 data: Cash balance Jan 1 10 000; Expected purchase of equipment 50 000 (40% paid); Dividends 30 000; Admin expense 40 000 (paid in month); Mortgage payment 5 000; Selling expense 5% of monthly sales (paid in month); Interest expense payable 1 000. Line of credit terms: borrowings taken at start of month, repayments made at end of month. Minimum cash balance maintained is 10 000.

Prepare the purchases schedule for the month of January 2011.