Question

Caraway Products is a wholesale distributor of snow shovels. Thus, peak sales occur in January of each year as shown in the company’s sales budget for the first quarter, given below:

January

February

March

Total

Budgeted sales (all on account)

$ 950,000

$ 750,000

$ 100,000

$ 1,800,000

From past experience, the company has learned that 25% of a month’s sales are collected in the month of sale, another 65% 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. November sales from the prior year totaled $150,000, and December sales from the prior year totaled $350,000.

Prepare a schedule of expected cash collections from sales, by month and in total, for the First quarter.

Assume that the company will prepare a budgeted balance sheet as of March 31. Compute the accounts receivable as of that date. ______________________

 

January

February

March

Total

Budgeted sales (all on account)

$ 950,000

$ 750,000

$ 100,000

$ 1,800,000

 

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