Midwest Products is a wholesale distributor of leaf rakes. Thus, peak sales occu
ID: 2448799 • Letter: M
Question
Midwest Products is a wholesale distributor of leaf rakes. Thus, peak sales occur in August of each year as shown in the company's sales budget for the third quarter, given below: From past experience, the company has learned that 25% of a month's sales are collected in the month of sale, another 70% are collected in the month following sale, and the remaining 5% are collected in the second month following sale. Bad debts are negligible and can be ignored. May sales totaled $432,000, and June sales totaled $504,000. Required: 1. Prepare a schedule of expected cash collections from sales, by month and in total, for the third quarter. (Do not round intermediate calculations.) 2. Assume that the company will prepare a budgeted balance sheet as of September 30. Compute the accounts receivable as of that date. (Do not round intermediate calculations.)Explanation / Answer
Schedule ofcollections Particulars May June July August September Total Credit Sales 432,000.00 504,000.00 574,000.00 891,000.00 491,000.00 1,956,000.00 Collection in same Month@25% (a) 108,000.00 126,000.00 143,500.00 222,750.00 122,750.00 489,000.00 Collection in same Month@70% (b) 302,400.00 352,800.00 401,800.00 623,700.00 1,378,300.00 Collection in second Month@5% (c) 21,600.00 25,200.00 28,700.00 75,500.00 Total collections a + b+c 517,900.00 649,750.00 775,150.00 1,942,800.00 Schedule of AR Particulars Amount August Sales @5% 44,550.00 September Sales @75% 368,250.00 Total AR 412,800.00