Midwest Products is a wholesale distributor of leaf rakes. Thus, peak sales occur in August of each year as shown in the company’s sales budget for the third quarter, given below:
| July | August | September | Total |
Budgeted sales (all on account) | $600.000 | $900.000 | $3500,000 | $2,000,000 |
From past experience, the company has learned that 20% of a month’s sales are collected in the month of sale, another 70% are collected in the month following sale, and the remaining 10% are collected in the second month following sale. Bad debts are negligible and can be ignored. May sales totaled $430,000. and June sales totaled $540,000.
Required:
1. Prepare a schedule of expected cash collections from sales, by month and in total, for the third quarter.
2. Assume that the company will prepare a budgeted balance sheet as of September 30. Compute the accounts receivable as of that date.
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