) XYZ, Inc. had actual sales of $150,000 in February and $160,000 in March. The
ID: 2443925 • Letter: #
Question
) XYZ, Inc. had actual sales of $150,000 in February and $160,000 in March. The firm’s managers estimate that sales in April, May, June and July will be $175,000, $180,000, $185,000, and $190,000, respectively. Purchases are 40% of the next month’s sales. Sales receipt patterns indicate that 60% of sales are received the same month as the sale. 30% are collected one month later and 10% are collected two months later. 50% of purchases are paid in the same month as the purchase and 50% are paid the following month. Assume that the firm has no other charges (either in Accounts Receivable or Accounts Payable) during these months.a. Compute cash receipts from sales and cash payments from purchases in April, May and June (doing each month separately and showing your work).
b. What is the estimated Accounts Payable balance on June 30?
c. Extra credit (1 point) What is the estimated Accounts Receivablebalance on June 30?
Explanation / Answer
a. Compute cash receipts from sales and cash payments from purchases in April, May and June (doing each month separately and showing your work).
April May June
Cash Receipts
Fabruary Sales $15,000
March Sales $48,000 $16,000
April Sales $105,000 $52,500 $17,500
May Sales $108,000 $54,000
June Sales $111,000
Total Collections $168,000 $176,500 $182,500
Cash Payments
$175,000x40%x50% $35,000
$180,000x40%x50% $36,000 $36,000
$185,000x40%x50% $37,000 $37,000
Total payments $71,000 $73,000 $37,000
b. What is the estimated Accounts Payable balance on June 30?
June purchase $185,000x40%x50% $37,000
July Purchase $190,000x40%x50% $38,000
$75,000
c. Extra credit (1 point) What is the estimated Accounts Receivablebalance on June 30?
May Sales $180,000 x 10% $18,000
June Sales $185,000 x 40% $74,000
$92,000
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