1) Westwood Appliances accounts receivable balance on May 31 is $72,000 (.20 x M

Question

1) Westwood Appliances accounts receivable balance on May 31 is $72,000 (.20 x May sales of $360,000). Their monthly forecasted sales are: June: $437,000, July: $441,000, August: $502,000, September: $531,000. Sales consist of 80% cash and 20% credit. All credit accounts are collected in the month following the sales. Uncollectible accounts are negligible and may be ignored. Prepare a sales budget schedule and a cash collections budget schedule for June, July, and August.

2) CJ’s distribution was preparing a sales budget for the first quarter of 2016. Forecast sales are as follows. January: $203,000, February: $227,000, March: $248,000. Sales are 40% cash and 60% on credit. Fifty-five percent of the credit accounts are collected in the month of sale, 35% in the month following the sale, and 10% in the following month. No uncollectible accounts are anticipated. Accounts receivable at the beginning of 2016 are $82,950 (10% of November credit sales of $150,000 and 45% of December credit sales of $151,000). Prepare a schedule showing sales and cash collections for January, February, and March, 2016.

3) REF Outfitters offers a 3% discount to customers who pay cash at the time of sale and a 2% discount to customers who pay within the first 10 days of the month after sale. Past experience shows that cash collections from customers tend to occur in the following pattern:

Cash collected at time of sale 55%

Collected within cash discount period in first 10 days of month after sale 15%

Collected after cash discount period in first month after month of sale 10%

Collected after cash discount period in second month after month of sale 15%

Never collected 5%

Compute the total cash budgeted to be collected in March if sales forecasts are $370,000 for January, $420,000 for February, and $460,000 for March.

4) Clark’s Retail plans inventory levels (at cost) at the end of each month as follows: May: $271,000, June: $226,000, July: $209,000, and August: $241,000. Sales are expected to be June: $449,000, July: $359,000, August: $306,000. Cost of goods sold is 65% of sales. Purchases in April were $258,000 and in May they were $188,000. Payments for each month’s purchases are made as follows: 15% during that month, 70% the next month, and the final 15% the next month. Prepare budget schedules for June, July, and August for purchases and for disbursements for purchases.

If you could show how you got the answer as well, thank you!

Explanation / Answer

(1)

Note: Accounts receivable for May is collected in June.

(2)

NOTE: First 2 questions are answered.

(1) SALES BUDGET SCHEDULE May June July Aug Sept Total Sales ($) 3,60,000 4,37,000 4,41,000 5,02,000 5,31,000 Cash Sales: 80% ($) 2,88,000 3,49,600 3,52,800 4,01,600 4,24,800 Credit Sales: 20% ($) 72,000 87,400 88,200 1,00,400 1,06,200 CASH COLLECTION SCHEDULE May June July Aug Sept Cash Collected: Accounts Receivable ($) (1) 72,000 Cash Collected: Credit Sales of previous month ($) (2) 72,000 87,400 88,200 1,00,400 Cash Collected: Cash Sales of current month ($) (3) 2,88,000 3,49,600 3,52,800 4,01,600 4,24,800 Total Cash Collected ($) (1) + (2) + (3) 2,88,000 4,93,600 4,40,200 4,89,800 5,25,200

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