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Maluwana Stores had sales of K700, 000 in November and K850, 000 in December
Maluwana Stores had sales of K700, 000 in November and K850, 000 in December. It expects sales to be as follows during the first six months of the next year:
Month January February March April May June
Sales K500, 000 450,000 550,000 600,000 625,000 600,000
In the past, 17.5 percent of Maluwana’s sales are paid in cash at the time of the sale, 52.5 percent are paid the following month, and 30 percent are paid in the second month following the sale.
- Prepare a spreadsheet showing the expected inflow of operating revenues for the first six months of next year.
- An analysis of the records of Maluwana Stores shows that the cost of goods they sell has averaged 70 percent of the Kwacha value of sales. To save inventory holding costs, Maluwana schedules its receipts of goods for the beginning of the month in which the goods are expected to be sold. Maluwana pays for 20 percent of its purchased goods in the same month that the suppliers deliver the goods. The store pays for 40 percent of its purchased goods in the month following delivery and for 40 percent of its purchased goods two months after delivery. Sales during November and December of last year and forecast sales for the first six months of next year are as given above. What are the cash outflows to pay for purchased goods for each of the first six months of next year?
Expert Solution
a. Prepare a statement showing the expected inflow of operating revenues for the first six months of next year.
| Particulars | Basis | November | December | January | February | March | April | May | June |
| Sales | Given | 700,000 | 850,000 | 500,000 | 450,000 | 550,000 | 600,000 | 625,000 | 600,000 |
| Cash from sales received in the same month | 17.5% of current month sales | 122,500 | 148,750 | 87,500 | 78,750 | 96,250 | 105,000 | 109,375 | 105,000 |
| Cash from sales received in the next month | 52.5% of previous month sale | 367,500 | 446,250 | 262,500 | 236,250 | 288,750 | 315,000 | 328,125 | |
| Cash from sales received 2 months later | 30% of the pre -previous months sale | 210,000 | 255,000 | 150,000 | 135,000 | 165,000 | 180,000 | ||
| Total Cash from Operating Revenue | 122,500 | 516,250 | 743,750 | 596,250 | 482,500 | 528,750 | 589,375 | 613,125 |
Cash from Operating Revenues for -
January - K743,750
February - K596,250
March - K482,500
April -K528,750
May -K589,375
June -K613,125
b. Prepare a statement to show the cash outflows to pay for purchased goods for each of the first six months of next year.
| Particulars | Basis | November | December | January | February | March | April | May | June |
| Sales | Given | 700,000 | 850,000 | 500,000 | 450,000 | 550,000 | 600,000 | 625,000 | 600,000 |
| Cost of Goods sold | 70% of sales | 490,000 | 595,000 | 350,000 | 315,000 | 385,000 | 420,000 | 437,500 | 420,000 |
| Cash paid on goods purchased in the same month | 20% of goods purchased in the current month | 98,000 | 119,000 | 70,000 | 63,000 | 77,000 | 84,000 | 87,500 | 84,000 |
| Cash paid on goods purchased in the next month | 40% of previous month purhase | 196,000 | 238,000 | 140,000 | 126,000 | 154,000 | 168,000 | 175,000 | |
| Cash paid on good purchased 2 months later | 40% of the pre-previous months purchase | 196,000 | 238,000 | 140,000 | 126,000 | 154,000 | 168,000 | ||
| Total Cash outflow for purchase of goods | 98,000 | 315,000 | 504,000 | 441,000 | 343,000 | 364,000 | 409,500 | 427,000 |
Cash paid for purchase of goods -
January - K504,000
February - K441,000
March - K343,000
April - K364,000
May - K409,500
June - K427,000.
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