Question

Badlands, Inc. manufactures a household fan that sells for $25 per unit. All sales are on account, with 40 percent of sales collected in the month of sale and 60 percent collected in the following month. The data that follow were extracted from the company's accounting records. Badlands maintains a minimum cash balance of $32,000. Total payments in January 20x1 are budgeted at $200,000. A schedule of cash collections for January and February of 20x1 revealed the following receipts for the period: Cash Receipts January February From December 31 accounts $120,000 receivable 85,000 $135,000 74,000 From January sales From February sales March 20x1 sales are expected to total 9,000 units Finished-goods inventories are maintained at 20 percent of the following month's sales. The December 31, 20x0, balance sheet revealed the following selected figures: cash, $23,400; accounts receivable, $120,000; and finished goods, $23,700.

Answer 1

1	December Sales	8,000	Units
	Cash Receipts of December Accounts Receivables in January = $ 120,000
	60% of Sales is collected in following Month
	December Total sales = $ 120,000 / 60%
		= $ 200,000
	Selling Price per unit = $ 25
	December Sales Unit = 200,000 / 25 = 8,000 units
2	Sales Revenue for March	$ 225,000
	Expected Sales Unit in March	9,000 units
	Selling Price per unit = $ 25
	Sales Revenue for March = 9,000 units * $ 25
	= $ 225,000
3	First Quarter Sales Revenue	$ 630,000
	January Sales
	Collected in January	85000
	Collected in February	135000
		220000
	February Sales
	Collected in February	74000
	40% of Sales is collected in same Month
	February Sales = $ 74,000 / 40% = $ 185,000
	February Sales	185000
	March Sales	$ 225,000
	Total for First Quarter	630000
4	March 31 Accounts Receivable	$ 135,000
	March 31 Accounts Receivable = March Sales * % to be collected in following month
	= 225,000 * 60%
	= $ 135,000
5	December 31 Finished Good Inventory	1760	units
	Finished Goods Inventory is 20% of next months Sales
	January Sales = $ 220,000
	Finished Goods Inventory in December = 20% * $ 220,000
	= $ 44,000
	Selling Price per unit = $ 25
	Finished Goods Inventory = $ 44,000 / $ 25
	= 1,760 units
6	Finished goods to be manufactured in January	9080	units
	Total Sales in January	220000
	Total Unit Sales in January ( 220,000 / 25 )	8800	units
	Beginning Inventory	1760	units
		10560
	Ending Inventory ( 20% * 185000 / $ 25)	1480	units
	Finished goods to be manufactured in January	9080	units
7	Financing required in January	$ 3,600
	Opening Cash	23400
	Cash Collected in january	205000
	Available Cash	228400
	Cash Payments	200000
	Closing bal	28400
	Minimum Balance to Maintain	32000
	Financing Reuired	3600