From past experience, the company has learned that 20% of a month’s sales are co

Question

From past experience, the company has learned that 20% of a month’s sales are collected in the month of sale, another 70% are collected in the month following sale, and the remaining 10% are collected in the second month following sale. Bad debts are negligible and can be ignored. May sales totaled $430,000, and June sales totaled $540,000.

Prepare a schedule of expected cash collections from sales, by month and in total, for the third quarter.

From past experience, the company has learned that 20% of a month’s sales are collected in the month of sale, another 70% are collected in the month following sale, and the remaining 10% are collected in the second month following sale. Bad debts are negligible and can be ignored. May sales totaled $430,000, and June sales totaled $540,000.

Prepare a schedule of expected cash collections from sales, by month and in total, for the third quarter.

  

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Assume that the company will prepare a budgeted balance sheet as of September 30. Compute the accounts receivable as of that date. (Do not round intermediate calculations.)

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Midwest Products is a wholesale distributor of leaf rakes. Thus, peak sales occur in August of each year as shown in the company’s sales budget for the third quarter, given below:

Explanation / Answer

Statement showing computations Particulars May June July August September Total Credit Sales            430,000.00           540,000.00               600,000.00            900,000.00          500,000.00           2,000,000.00 Collection in same month @20% (a)              86,000.00           108,000.00               120,000.00            180,000.00          100,000.00               400,000.00 Collection in next month @70% (b)           301,000.00               378,000.00            420,000.00          630,000.00           1,428,000.00 Collection in second month @10% (c)                 43,000.00              54,000.00             60,000.00               157,000.00 Total collections a +b +c               541,000.00            654,000.00          790,000.00           1,985,000.00                                 -   Accounts Receivable August = 900,000 * 10%              90,000.00 September = 500,000 *80%            400,000.00 Total Accounts Receivable            490,000.00

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