Vernon Pointers Corporation expects to begin operations on January 1, 2019; it w

Question

Vernon Pointers Corporation expects to begin operations on January 1, 2019; it will operate as a specialty sales company that sells laser pointers over the Internet. Vernon expects sales in January 2019 to total $250,000 and to increase 20 percent per month in February and March. All sales are on account. Vernon expects to collect 68 percent of accounts receivable in the month of sale, 25 percent in the month following the sale, and 7 percent in the second month following the sale.

Required

Prepare a sales budget for the first quarter of 2019.

Determine the amount of sales revenue Vernon will report on the first 2019 quarterly pro forma income statement.

Prepare a cash receipts schedule for the first quarter of 2019.

Determine the amount of accounts receivable as of March 31, 2019.

Explanation / Answer

Sales Budget for first Quarter Jan Feb March Total Expected Sales in Jan in $ 250,000 Expected Sales for Feb (rise by 20% of Jan sales) 300000 Expected sales of March(rise by 20% of Feb sales) 360000 910,000 Budgeted Sales revenue for Quarter 250,000 300,000 360,000 910,000 Total Sales revenue reported in Proforma financial statement of First Quarter = $ 910,000 Jan Feb March Total Jan Sales realised 170000 62500 17500 250000 Feb Sales Realised 204000 75000 279000 March Sales realised 244800 244800 Total Collections 170000 266500 337300 773800 Accounts Recievabel at the end of First Quarter Accounts receivable for Feb (300,000 *7%) 21000 Accounts Recievable for March( 360,000*32%) 115200 Accounts recievable balance at the end 136200

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