Badlands, Inc. manufactures a household fan that sells for $20 per unit. All sal
ID: 2561515 • Letter: B
Question
Badlands, Inc. manufactures a household fan that sells for $20 per unit. All sales are on account, with 45 percent of sales collected in the month of sale and 55 percent collected in the following month. The data that follow were extracted from the company’s accounting records.
Badlands maintains a minimum cash balance of $24,000. Total payments in January 20x1 are budgeted at $210,000.
A schedule of cash collections for January and February of 20x1 revealed the following receipts for the period:
March 20x1 sales are expected to total 12,000 units.
Finished-goods inventories are maintained at 25 percent of the following month’s sales.
The December 31, 20x0, balance sheet revealed the following selected figures: cash, $23,500; accounts receivable, $121,000; and finished goods, $23,850.
Required:
Determine the number of units that Badlands sold in December 20x0.
Compute the sales revenue for March 20x1.
Compute the total sales revenue to be reported on Badlands’ budgeted income statement for the first quarter of 20x1.
Determine the accounts receivable balance to be reported on the March 31, 20x1, budgeted balance sheet.
Calculate the number of units in the December 31, 20x0, finished-goods inventory.
Calculate the number of units of finished goods to be manufactured in January 20x1.
Calculate the financing required in January, if any, to maintain the firm’s minimum cash balance.
Cash Receipts January February From December 31 accounts receivable $ 121,000 From January sales 86,000 $ 134,000 From February sales 74,700Explanation / Answer
Req1: Total collection of Dec Sales in Jan month $ 121,000 (which is 55% of total sales)
Therefore, Total sales in December month = (121,000 /55 *100 ) = $ 220,000
Selling price per unit = $ 20 per unit
Sales Units of Dec month ( 220,000 /20 ) = 11,000 units
Req2: Expected sales in March : 12,000 units
Selling price per unit = $ 20 per unit
Sales revenue of March month= $ 240,000 ( 12,000 units@20)
Req3: Total sales revenue for first quarter:
Sales revenue of each month:
Jan month, Total sales (86,000+134,000) = $ 220,000
Feb month, Total sales (74,700/45*100) = $ 166,000
Expected sales of March month = $240,000
Total Sales revenue of Quarter ( 220,000+166,000+240,000) = $ 626,000
Req4:
Accounts receivable as on 31.03.20X1 will be equal to 55% of expected sales of March (as only 55% of the month sales is collected next month)
Expected sales of March month = $ 240,000
Therefore, Accounts receivable at the end of Quarter = ( 240,000 *55%) = $ 132,000
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