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Goldberg Company is a retail sporting goods store that uses an accrual accounting system. Facts regarding its operations follRequired: 1. What is the total of budgeted cash collections for December? 2. How much is the book value of accounts receivabl

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Answer #1
  1. Budgeted Cash Collection

The collection of 50% is done in the month of sales, 2% is deemed uncollectible and balance 48% in next month. If the payment is made within terms, 1% discount is allowed which is given below.

Schedule of cash receipts

December

Current accounts receivable ( 50% of 190,000)

$ 95,000

Less: Discount ( 1% of 95,000)

(950)

Add: Collection from prior month Accounts receivable (given in the statement of financial position)

48,000

Total collections

$ 142,050

  1. Net accounts receivable, December 31

Accounts Receivable, December 31

$ 95,000

Less: allowance for doubtful debts at 2% of above

$ 1,900

Net accounts receivable, December 31

$ 93,100

  1. Pre-tax operating income, December 31

Sales Revenue

$ 190,000

Gross margin ( 30% of sales)

57,000

Less: Operating expenses

       Bad debts ( 2% of 190,000)

(3,800)

       Expenses paid in cash

(15,200)

       Monthly depreciation (144,000/12)

(12,000)

Income (loss) before income taxes

$ 26,000

  1. Budgeted inventory December 31

Sales for the month of January

$ 160,000

Inventory on hand on December 31 (80% of 160,000)

$ 128,000

  1. Budgeted purchases for December

Sales

$ 190,000

Add: Closing inventory

$ 128,000

Less: Opening inventory

$ 106,400

Purchases

$ 211,600

  1. Budgeted accounts payable shall be $ 211,600 as all payment is done in the month following the purchase month

kindly upvote

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