: Mitchell Company had the following budgeted sales for the last half of last ye
ID: 2564334 • Letter: #
Question
:Mitchell Company had the following budgeted sales for the last half of last year:
July Cash sales = $50,000; Credit sales = $150,000
August Cash sales = 55,000; Credit sales = 170,000
September Cash sales = 45,000; Credit sales = 130,000
October Cash sales = 50,000; Credit sales = 145,000
November Cash sales = 60,000; Credit sales = 200,000
December Cash sales = 80,000; Credit sales = 350,000
The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled:
Collections on credit sales:
60% in month of sale
30% in month following sale
10% in second month following sale
1) Assume that the accounts receivable balance on July 1 was $75,000. Of this amount, $60,000 represented uncollected June sales and $15,000 represented uncollected May sales. Given these data, the total cash collected during July would be:
2) What is the budgeted accounts receivable balance on December 1?
Explanation / Answer
Working 1 To caclulate the cash collection during July, we will prepare Cash Budget for our calculations and better understanding CASH BUDGET Particulars July August September October November December Credit Sales $ 150,000 $ 170,000 $ 130,000 $ 145,000 $ 200,000 $ 350,000 Month Amoount Month Amoount Month Amoount Month Amoount Month Amoount Month Amoount Collection from Credit sales May $ 15,000 June $ 15,000 July $ 15,000 August $ 17,000 September $ 13,000 October $ 14,500 June $ 45,000 July $ 45,000 August $ 51,000 September $ 39,000 October $ 43,500 November $ 60,000 July $ 90,000 August $ 102,000 September $ 78,000 October $ 87,000 November $ 120,000 December $ 210,000 Total collection from Credit Sales [A] $ 150,000 $ 162,000 $ 144,000 $ 143,000 $ 176,500 $ 284,500 Cash Sales [B] $ 50,000 $ 55,000 $ 45,000 $ 50,000 $ 60,000 $ 80,000 Total Collection [A+B] $ 200,000 $ 217,000 $ 189,000 $ 193,000 $ 236,500 $ 364,500 Working 2 We will prepare the ledger of Accounts receivable Budgeted Accounts Receivable A/c Date Particulars Amount Date Particulars Amount July,1 To Opening Balance $ 75,000 July,31 By Collection July,31 To Credit Sales $ 150,000 July,31 from May $ 15,000 July,31 from June $ 45,000 July,31 from July $ 90,000 July,31 By Balance b/f $ 75,000 TOTAL $ 225,000 TOTAL $ 225,000 August,1 To Balance c/f $ 75,000 August,31 By Collection August,31 To Credit Sales $ 170,000 August,31 from June $ 15,000 August,31 from July $ 45,000 August,31 from August $ 102,000 August,31 By Balance b/f $ 83,000 TOTAL $ 245,000 TOTAL $ 245,000 September,1 To Balance c/f $ 83,000 September,30 By Collection September,30 To Credit Sales $ 130,000 September,30 from July $ 15,000 September,30 from August $ 51,000 September,30 from September $ 78,000 September,30 By Balance b/f $ 69,000 TOTAL $ 213,000 TOTAL $ 213,000 October,1 To Balance c/f $ 69,000 October,31 By Collection October,31 To Credit Sales $ 145,000 October,31 from August $ 17,000 October,31 from September $ 39,000 October,31 from October $ 87,000 October,31 By Balance b/f $ 71,000 TOTAL $ 214,000 TOTAL $ 214,000 November,1 To Balance c/f $ 71,000 November,30 By Collection November,30 To Credit Sales $ 200,000 November,30 from September $ 13,000 November,30 from October $ 43,500 November,30 from November $ 120,000 November,30 By Balance b/f $ 94,500 TOTAL $ 271,000 TOTAL $ 271,000 December,1 To Balance c/f $ 94,500 December,31 By Collection December,31 To Credit Sales $ 350,000 December,31 from October $ 14,500 December,31 from November $ 60,000 December,31 from December $ 210,000 December,31 By Balance b/f $ 160,000 TOTAL $ 444,500 TOTAL $ 444,500 Answer 2 Budgeted Accounts Receivable as on = $ 94,500 Answer 1 On the basis of above calculation, cash collected durin July is $200000.
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