Problem 8-121 [LO 8-4] Spencer Company has budgeted sales for the upcoming month

Question

Problem 8-121 [LO 8-4]

Spencer Company has budgeted sales for the upcoming months as follows:

60% of the sales are credit sales, the remainder are made in cash. Credit sales are collected 40% in the month of sale, 45% in the month following the sale, and 15% in the second month following the sale.

a. Compute Spencer’s cash receipts for April. (Do not round intermediate calculations.)

b. Compute Spencer’s cash receipts for May. (Do not round intermediate calculations.)

c. Compute the accounts receivable balance for May 31. (Do not round intermediate calculations.)

February $ 600,000 March $ 625,000 April $ 650,000 May $ 677,000

Explanation / Answer

a) Compute Spencer’s cash receipts for April

Cash receipts for april :

b) Compute Spencer’s cash receipts for May

Cash receipts for May :

c. Compute the accounts receivable balance for May 31

Account receivable = (650000*60%*15%+677000*60%*60%) = 302220

April Cash sales (650000*40%) 260000 Collection from credit sales February sales (600000*60%*15%) 54000 March sales (625000*60%*45%) 168750 April sales (650000*60%*40%) 156000 Cash receipts for april 638750

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