Ed’s Waterbeds has made the following sales projections for the next six months. All sales are credit sales.
March | $ | 32,000 | June | $ | 36,000 |
April | 38,000 | July | 44,000 | ||
May | 27,000 | August | 46,000 | ||
Sales in January and February were $35,000 and $34,000 respectively.
Experience has shown that 10 percent of total sales are uncollectible, 30 percent are collected in the month of sale, 40 percent are collected in the following month, and 20 percent are collected two months after sale.
a. Prepare a monthly cash receipts schedule for the firm for March through August.
Ed’s Waterbeds Cash Receipts Schedule |
||||||||||||||
January | February | March | April | May | June | July | August | |||||||
Sales | $ | $ | $ | $ | $ | $ | $ | $ | ||||||
Collections of current sales | ||||||||||||||
Collections of prior month's sales | ||||||||||||||
Collections of sales 2 months earlier | ||||||||||||||
Total cash receipts | $ | $ | $ | $ | $ | $ | ||||||||
b. Of the sales expected to be made during the six months from March to August, how much will still be uncollected at the end of August? How much of this is expected to be collected later?
Amount | |
Uncollected | $ |
Expected to be collected | $ |
A)Ed's Waterbeds
Monthly cash receipts schedule for the firm from March to August
March | April | May | June | July | August | |
Sales | $32,000 | $38,000 | $27,000 | $36,000 | $44,000 | $46,000 |
Collection of current sales (30%) |
30%×$32,000 =$9,600 |
30%×$38,000 =$11,400 |
30%×$27,000 =$8,100 |
30%×$36,000 =$10,800 |
30%×$44,000 =$13,200 |
30%×$46,000 =$13,800 |
Collection of prior months sales 40% |
40% of feb 40%×$34,000 =$13,600 |
40%of March 40%×$32,000 =$12,800 |
40% of April 40%×$38,000 =$15,200 |
40% of May 40%×$27,000 =$10,800 |
40% of June 40%×$36,000 =$14,400 |
40% of July 40%×$44,000 =$17,600 |
Collection of sale 2month earlier (20%) |
20% of Jan =$7,000 |
20% of feb 20%×$34,000 =$6,800 |
20% of March 20%×$32,000 =$6,400 |
20% of April 20%×$38,000 =$7,600 |
20% of May 20%×$27,000 =$5,400 |
20% of June 20%×$36,000 =$7,200 |
Total Cash Receipts | $30,200 | $31,000 | $29,700 | $29,200 | $33,000 | $38,600 |
B)
Uncollected sales | |
March 10%×$32,000 | 3,200 |
April 10%×$38,000 | 3,800 |
May 10%×$27,000 | 2,700 |
June 10%×$36,000 | 3,600 |
July 10%×$44,000 | 4,400 |
August 10%×$46,000 | 4,600 |
Total uncollected sales | $22,300 |
Expected to be collected later | |
August (40%×$46,000+20%×$46,000) =$18,400+$9,200 |
$27,600 |
July (20%×$44,000) | $8,800 |
$36,400 |
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