Schedule of Cash Collections of Accounts Receivable Pet Place Supplies Inc., a p

Question

Schedule of Cash Collections of Accounts Receivable

Pet Place Supplies Inc., a pet wholesale supplier, was organized on May 1. Projected sales for each of the first three months of operations are as follows:

All sales are on account. Of sales on account, 51% are expected to be collected in the month of the sale, 45% in the month following the sale, and the remainder in the second month following the sale.

Prepare a schedule indicating cash collections from sales for May, June, and July.

Explanation / Answer

Pet Place Supplies Inc. Schedule of Cash Collections from Sales For the Three Months Ending July 31 Explanation to Solution May June July May June July May sales on account: Collected in May 163200 (320000*51%) Collected in June 144000 (320000*45%) Collected in July 12800 (320000*4%) June sales on account: Collected in June 188700 (370000*51%) Collected in July 166500 (370000*45%) July sales on account: Collected in July 244800 (480000*51%) Total cash collected 163200 332700 424100 Total Total Total Working Note: May June July Budgeted Sales 320000 370000 480000 Collection Pattern: In the Month 51% In First Month Following Sales 45% In Second Month Following Sales 4% 100%

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