1. Pet Delight specializes in gourmet pet treats. Sales estimates in millions fo

Question

1. Pet Delight specializes in gourmet pet treats. Sales estimates in millions for the next two quarters are $500 for 1Q and $600 for 2Q. All sales are made on credit. The company’s beginning accounts receivable balance is $250. The company’s Days in Receivables is 30 days. Cash collections from Accounts Receivables in 1Q would be estimated to be:

$417

$250

$750

$583                    

$167

Continuing from above, Pet Delight has a Payables period of 45 days. Purchases are expected to be 50% of next quarter’s sales. The company’s beginning Accounts Payable balance is $125. Using sales data from problem 10, disbursements during 1Q would be estimated to be:

$275                     

$425

$725

$325

$583

Explanation / Answer

Answer to Q1 is $ 583

ACP = 30 days, this implies that 2/3 of sales are collected in the quarter made and the remaining 1/3 are collected the following quarter

Therefore, Cash collection on account of Sales of Q1 = 500*2/3 = 333.33 or 333

(+ )Opening Balance of Accounts receivable will be collected in Q1 = 250

Then, cash collection from Accounts receivable in Q1= 250 + 333 = $ 583

Answer to Q2 is $ 275

Payables period is 45 days, so half of the purchases will be paid for each quarter and the remaining will be paid the following quarter

Purchase in Q1 = 50% of Sale of Q2 = $ 300

Payment of accounts payable in Q1 = 125 + 300/2 = $ 275

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.