Thursday, 2 August 2012

Midwest Products is a wholesale distributor of leaf rakes. Thus, peak sales


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:


July
August
September
Total
  Budgeted sales (all on account)
$ 600,000    
$ 900,000    
$ 500,000    
$ 2,000,000  



From past experience, the company has learned that 20% of a month’s sales are collected in the month of sale, another 70% 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. May sales totaled $430,000, and June sales totaled $540,000.
Required:
1.
Prepare a schedule of expected cash collections from sales, by month and in total, for the third quarter. (Do not round intermediate calculations. Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

Schedule of Expected Cash Collections

     July
       August
       September
           Total
  May sales
$ 43,000 correct  
$ 0 correct  
$ 0 correct  
$ 43,000 correct  
  June sales
378,000 correct  
54,000 correct  
correct  
432,000 correct  
  July sales
120,000 correct  
420,000 correct  
60,000 correct  
600,000 correct  
  August sales
correct  
180,000 correct  
630,000 correct  
810,000 correct  
  September sales
correct  
correct  
100,000 correct  
100,000 correct  









  Total cash collections
$ 541,000 correct  
$ 654,000 correct  
$ 790,000 correct  
$ 1,985,000 correct  

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. Omit the "$" sign in your response.)

  Total accounts receivable
$ n/r incorrect  

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