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Northeast Products is a wholesale distributor of swim accessories. Peak sales oc

ID: 2400538 • Letter: N

Question

Northeast Products is a wholesale distributor of swim accessories. Peak sales occur in May of each year as shown in the company's sales budget for the second quarter, given below: 1. Budgeted sales (all on account) $780,000 $1,010,000 $850,000 $2,640,000 From past experience, the company has learned that 25% of a month's sales are collected in the month of sale, another 60% are collected in the month following sale, and the remaining 15% are collected in the second month following sale. Bad debts are negligible and can be ignored February sales totaled $660,000, and March sales totaled $725,000. Required 1. Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter. Assume that the company will prepare a budgeted balance sheet as of June 30. Compute the accounts receivable as of that date 2.

Explanation / Answer

Answers

April

May

June

Budgeted Sales

$                           780,000.00

$         1,010,000.00

$                   850,000.00

25% collected in the month

$                          195,000.00

$             252,500.00

$                   212,500.00

60% to be collected next month

$                           468,000.00

$             606,000.00

$                   510,000.00

15% to be collected in second month

$                           117,000.00

$             151,500.00

$                   127,500.00

April

May

June

Total (Quarter)

Cash collected for:

February Sales

$                             99,000.00

$                        99,000.00

March Sales

$                           435,000.00

$             108,750.00

$                     543,750.00

April Sales

$                           195,000.00

$             468,000.00

$                   117,000.00

$                     780,000.00

May Sales

$             252,500.00

$                   606,000.00

$                     858,500.00

June Sales

$                   212,500.00

$                     212,500.00

Total Cash Collected

$                           729,000.00

$             829,250.00

$                   935,500.00

$                  2,493,750.00

-----The Ending balance on June 30 is calculated using two ways below-----

Way #1

Beginning Accounts receivables balance on April 1:

February Sales [15%]

$                             99,000.00

March Sales [60% + 15%]

$                           543,750.00

$             642,750.00

Total Credit Sales:

April

$                           780,000.00

May

$                       1,010,000.00

June

$                           850,000.00

$         2,640,000.00

Total Cash Collected [Req 1]

$       (2,493,750.00)

Ending Balance of Accounts receivables on June 30

$             789,000.00

Way #2

Ending Balance of Accounts receivables on June 30

From May Sales [Sales x 15%]

$                           151,500.00

From June Sales [ Sales x (60% + 15%)]

$                           637,500.00

Total

$                           789,000.00

----Answer from both = $ 789,000.00

April

May

June

Budgeted Sales

$                           780,000.00

$         1,010,000.00

$                   850,000.00

25% collected in the month

$                          195,000.00

$             252,500.00

$                   212,500.00

60% to be collected next month

$                           468,000.00

$             606,000.00

$                   510,000.00

15% to be collected in second month

$                           117,000.00

$             151,500.00

$                   127,500.00

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