Task: Peak sales for Midwest Products, a wholesale distributor of leaf rakes, occur in August. The company's sales budget for the third quarter showing these peak sales is given below:
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July
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August
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September
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Total
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Budgeted sales (all on account)
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$567,000
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$789,000
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$461,000
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$1,817,000
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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 $429,000, and June sales totaled $528,000.
Requirement 1:
Prepare a schedule of expected cash collections from sales, by month and in total for the third quarter.
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July
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August
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September
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Total
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May sales
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$
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$
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$
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$
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|
June sales
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|
|
|
|
|
July sales
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|
|
|
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August sales
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|
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September sales
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|
|
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Total cash collections
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$
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$
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$
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$
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Requirement 2:
Assume that the company will prepare a budgeted balance sheet as of September 30. Compute the accounts receivable as of that date.
Accounts Receivable = $