PRO FORMA ACCOUNTS RECEIVABLE BALANCE CALCULATION On March 31, 2013, Mikes bike
ID: 2761663 • Letter: P
Question
PRO FORMA ACCOUNTS RECEIVABLE BALANCE CALCULATION
On March 31, 2013, Mikes bike shop has outstanding accounts receivable of $17,500. Mike's sales are roughly evenly split between credit and cash sales, with the credit sales collected hald in the month after the sale and the remainder 2 months after the sale. Historical and projected sales for the bike shop are given here.
MONTH SALES MONTH SALES
January $15,000 March $25,000
February $20,000 April (projected) $29,000
A-UNDER THESE CIRCUMSTANCES, WHAT SHOULD THE BALANCE IN ACCOUNS RECEIVABLE BE AT THE END OF APRIL? $_______________ ROUND TO THE NEAREST DOLLAR.
B-HOW MUCH CASH DID MIKE'S REALIZE DURING APRIL FROM SALES AND COLLECITONS? $______________ ROUND TO THE NEAREST DOLLAR.
Explanation / Answer
January:
Total Credit Sales = $15,000/2 = $7,500
Amount received in February (Next Month) = $7,500/2 = $3,750
Amount to be received in April (2 months after) = $3,750
February:
Total Credit Sales = $20,000/2 = $10,000
Amount received in March (Next Month) = $10,000/2 = $5,000
Amount to be received in May (2 months after) = $5,000
March:
Total Credit Sales = $25,000/2 = $12,500
Amount to be received in April (Next Month) = $12,500/2 = $6,250
Amount to be received in June (2 months after) = $6,250
Remaining amount from the account receivable at the end of March:
$17,500 - $3,750 - $6,250 = $7,500
Account Receivables at the end of April = $14,500 + $7,500 = $22,000
2. Cash Realized during April from Sales & Collection:
$14,500 + $3,750 + $6,250 = $24,500
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