Chapter 6 Exercise 2 2. Schedule of cash collections Sugarland Company sells a s

Question

Chapter 6 Exercise 2

2. Schedule of cash collections

Sugarland Company sells a single product and anticipates opening a new facility in Charlotte on May 1 of the current year. Expected sales during the first three months of activity are: May, $60,000; June, $80,000; and July, $85,000. Thirty percent of all sales are for cash; the remaining 70% are on account. Credit sales have the following collection pattern:

Collected in the month of sale 60%

Collected in the month following sale 35

Uncollectible 5

a. Prepare a schedule of cash collections for May through July.

b. Compute the expected balance in Accounts Receivable as of July 31.

Explanation / Answer

May June July Cash collection on: Cash Sale $ 18,000.00 $ 24,000.00 $ 25,500.00 Credit sale In the month of sale $ 25,200.00 $ 33,600.00 $ 35,700.00 In the following month sale $ - $ 14,700.00 $ 19,600.00 Total cash Collected $ 43,200.00 $ 72,300.00 $ 80,800.00 May June July Opening Account Recievable $ - $ 16,800.00 $ 24,500.00 Add: Credit Sale $ 42,000.00 $ 56,000.00 $ 59,500.00 Less: Collected $ 25,200.00 $ 48,300.00 $ 55,300.00 Closing Account Recievable $ 16,800.00 $ 24,500.00 $ 28,700.00

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