1 Midwest Products is a wholesale distributor of leaf rakes. Thus, peak sales oc
ID: 2454937 • Letter: 1
Question
1
Midwest Products is a wholesale distributor of leaf rakes. Thus, peak sales occur in August of each year as shown in the company’s sales budget for the third quarter, given below:
July
August
September
Total
Budgeted sales (all on account)
$599,000
$ 873,000
$ 477,000
$1,949,000
From past experience, the company has learned that 20% of a month’s sales are collected in the month of sale, another 75% are collected in the month following sale, and the remaining 5% are collected in the second month following sale. Bad debts are negligible and can be ignored. May sales totaled $403,000, and June sales totaled $506,000.
Required:
1.
Prepare a schedule of expected cash collections from sales, by month and in total, for the third quarter.(Do not round intermediate calculations.)
Schedule of Expected Cash Collections
July
August
September
Total
May sales
June sales
July sales
August sales
September sales
Total cash collections
2.
Assume that the company will prepare a budgeted balance sheet as of September 30. Compute the accounts receivable as of that date. (Do not round intermediate calculations.)
August sales
September sales
Total accounts receivable
Midwest Products is a wholesale distributor of leaf rakes. Thus, peak sales occur in August of each year as shown in the company’s sales budget for the third quarter, given below:
Explanation / Answer
Solution:
Schedule of Expected Cash Collections
July
August
September
Total
May sales
4,03,000
12,09,000
June sales
5,06,000
5,06,000
15,18,000
July sales
1,19,800
1,74,600
95,400
3,89,800
August sales
6,54,750
3,57,750
14,61,750
September sales
23,850
94,450
Total cash collections
15,08,000
17,82,000
13,86,000
46,73,000
(B). Expected Balance Sheet
August sales
17,82,000
September sales
13,86,000
Total accounts receivable
31,68,000
Schedule of Expected Cash Collections
July
August
September
Total
May sales
4,03,000
4,03,000 4,03,00012,09,000
June sales
5,06,000
5,06,000
5,06,00015,18,000
July sales
1,19,800
1,74,600
95,400
3,89,800
August sales
4,49,2506,54,750
3,57,750
14,61,750
September sales
29,950 43,65023,850
94,450
Total cash collections
15,08,000
17,82,000
13,86,000
46,73,000
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