Northeast Products is a wholesale distributor of swim accessories. Peak sales oc
ID: 2400538 • Letter: N
Question
Northeast Products is a wholesale distributor of swim accessories. Peak sales occur in May of each year as shown in the company's sales budget for the second quarter, given below: 1. Budgeted sales (all on account) $780,000 $1,010,000 $850,000 $2,640,000 From past experience, the company has learned that 25% of a month's sales are collected in the month of sale, another 60% are collected in the month following sale, and the remaining 15% are collected in the second month following sale. Bad debts are negligible and can be ignored February sales totaled $660,000, and March sales totaled $725,000. Required 1. Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter. Assume that the company will prepare a budgeted balance sheet as of June 30. Compute the accounts receivable as of that date 2.Explanation / Answer
Answers
April
May
June
Budgeted Sales
$ 780,000.00
$ 1,010,000.00
$ 850,000.00
25% collected in the month
$ 195,000.00
$ 252,500.00
$ 212,500.00
60% to be collected next month
$ 468,000.00
$ 606,000.00
$ 510,000.00
15% to be collected in second month
$ 117,000.00
$ 151,500.00
$ 127,500.00
April
May
June
Total (Quarter)
Cash collected for:
February Sales
$ 99,000.00
$ 99,000.00
March Sales
$ 435,000.00
$ 108,750.00
$ 543,750.00
April Sales
$ 195,000.00
$ 468,000.00
$ 117,000.00
$ 780,000.00
May Sales
$ 252,500.00
$ 606,000.00
$ 858,500.00
June Sales
$ 212,500.00
$ 212,500.00
Total Cash Collected
$ 729,000.00
$ 829,250.00
$ 935,500.00
$ 2,493,750.00
-----The Ending balance on June 30 is calculated using two ways below-----
Way #1
Beginning Accounts receivables balance on April 1:
February Sales [15%]
$ 99,000.00
March Sales [60% + 15%]
$ 543,750.00
$ 642,750.00
Total Credit Sales:
April
$ 780,000.00
May
$ 1,010,000.00
June
$ 850,000.00
$ 2,640,000.00
Total Cash Collected [Req 1]
$ (2,493,750.00)
Ending Balance of Accounts receivables on June 30
$ 789,000.00
Way #2
Ending Balance of Accounts receivables on June 30
From May Sales [Sales x 15%]
$ 151,500.00
From June Sales [ Sales x (60% + 15%)]
$ 637,500.00
Total
$ 789,000.00
----Answer from both = $ 789,000.00
April
May
June
Budgeted Sales
$ 780,000.00
$ 1,010,000.00
$ 850,000.00
25% collected in the month
$ 195,000.00
$ 252,500.00
$ 212,500.00
60% to be collected next month
$ 468,000.00
$ 606,000.00
$ 510,000.00
15% to be collected in second month
$ 117,000.00
$ 151,500.00
$ 127,500.00
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