EXERCISE 8-1 Schedule of Expected Cash Collections [L02 Midwest Products is a wh

Question

EXERCISE 8-1 Schedule of Expected Cash Collections [L02 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).. $600,000 $900,000 s500,000 $2,000,000 From past experience, the company has learned that 20% of a month's sales are collected in the month of sale, another 70% are collected in the month following sale, and the remaining 10% are collected in the second month following sale. Bad debts are negligible and can be ignored. May sales totaled $430,000, and June sales totaled $540,000 Required 1. Prepare a schedule of expected cash collections from sales, by month and in total, for the third quarter

Explanation / Answer

Midwest Schedule of expected cash collections from sales by month and total for the Third quarter Past experience trends May June July Aug Sept Total (July to Sept ) 20% Collected in the same month 86000 108000 120000 180000 100000 400000 70% Collected in the next month 301000 378000 420000 630000 1428000 10% in the second month 43000 54000 60000 157000 Total 86000 409000 541000 654000 790000 1985000 May sales 430,000 June sales 540,000 Budgeted sales 600000 900000 500000 2000000

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