Caraway Products is a wholesale distributor of snow shovels. Thus, peak sales oc
ID: 2567932 • Letter: C
Question
Caraway Products is a wholesale distributor of snow shovels. Thus, peak sales occur in January of each year as shown in the company’s sales budget for the first quarter, given below:
January
February
March
Total
Budgeted sales (all on account)
$ 950,000
$ 750,000
$ 100,000
$ 1,800,000
From past experience, the company has learned that 25% of a month’s sales are collected in the month of sale, another 65% 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. November sales from the prior year totaled $150,000, and December sales from the prior year totaled $350,000.
Prepare a schedule of expected cash collections from sales, by month and in total, for the First quarter.
Assume that the company will prepare a budgeted balance sheet as of March 31. Compute the accounts receivable as of that date. ______________________
January
February
March
Total
Budgeted sales (all on account)
$ 950,000
$ 750,000
$ 100,000
$ 1,800,000
Explanation / Answer
January February March Total Budgeted sales (all on account) $950,000 $750,000 $100,000 $1,800,000 Ratio of collection 25 65 10 1 Caraway Products Expected Cash Collections For Quarter End March 31, 2016 January February March Total Beginning Accounts Receivable $242,500 - - $242,500 January Sales (25/65/10) 237,500 617,500 95,000 950,000 February Sales(0/25/65) - 187,500 487,500 675,000 March Sales (0/0/25) - - 25,000 25,000 Total $480,000 $805,000 $607,500 $1,892,500 2 Accounts Receivable as of March 31st would be: February sales - 10% 75,000 March Sales - 75% 75,000 150,000
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