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Data regarding VeeLanceCorporation store's operations follow:

Sales are budgeted at $340,000 for November, $360,000 for December, and $350,000 for January.

Collections are expected to be 75% in the month of sale and 25% in the month following the sale.

The cost of goods sold is 71% of sales.

The the company desires an ending merchandise inventory equal to 75% of the cost of goods sold in the following month.

Payment for merchandise is made in the month following the purchase.

Other monthly expenses to be paid in cash are $21,400.

Monthly depreciation is $21,200.

Ignore taxes.

Balance SheetOctober 31

AssetsCash$22,200

Accounts receivable83,200

Merchandise inventory181,050

Property, plant and equipment (net of $596,000 accumulated depreciation)1,006,000

Total assets$1,292,450

Liabilities and Stockholders' EquityAccounts payable$196,200

Common stock640,000

Retained earnings456,250

Total liabilities and stockholders' equity$1,292,450.

Required:

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

b. Prepare a Merchandise Purchases Budget for November.

c. Prepare Cash Budgets for November.

d. Prepare Budgeted Income Statement for November.

e. Prepare a Budgeted Balance Sheet for the end of November.

f.Explain, in your own words, the purpose of a budget. Does it guarantee performance? does it ensure that a company will be profitable?

g. Assume that the company desires a gross profit margin (ratio) of 25%. If the budget is met, will the company meet the desired goal? Explain.

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