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 |
Accounts Receivable, December 31 |
$ 95,000 |
Less: allowance for doubtful debts at 2% of above |
$ 1,900 |
Net accounts receivable, December 31 |
$ 93,100 |
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 |
Sales for the month of January |
$ 160,000 |
Inventory on hand on December 31 (80% of 160,000) |
$ 128,000 |
Sales |
$ 190,000 |
Add: Closing inventory |
$ 128,000 |
Less: Opening inventory |
$ 106,400 |
Purchases |
$ 211,600 |
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Goldberg Company is a retail sporting goods store that uses an accrual accounting system. Facts regarding...
Goldberg Company is a retail sporting goods store that uses an accrual accounting system. Facts regarding its operations follow: Sales are budgeted at $190,000 for December and $160,000 for January, terms 1/eom, n/60 Collections are expected to be 50% in the month of sale and 48% in the month following the sale. Two percent of sales are expected to be uncollectible and recorded in an allowance account at the end of the month of sale. Bad debts expense is included...
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