Question

Armand Company projects the following sales for the first three months of the year: $10,600 in January; $12,300 in February; and $12,900 in March The company expects 60% of the sales to be cash and the remainder on account. Sales on account are collected 50% in the month of the sale and 50% in the following month. The Accounts Receivable account has a zero balance on January 1. Round to the nearest dollar. 1. Prepare a schedule of cash receipts for Armand for January, February, and March. What is the balance in Accounts Receivable on March 31? 2. Prepare a revised schedule of cash receipts if receipts from sales on account are 60% in the month of the sale, 30% in the month following the sale, and 10% in the second month following the sale. What is the balance in Accounts Receivable on March 31? Solution: Requirement 1 Schedule of Cash Receipts from Customers January February March Total Total Sales $10,600 $12,300 $12,900 $35,800 Cash Receipts from Customers Accounts Receivable Balance, January 1 $0 1st Qtr. - Cash sales (60%) 6,360 1st Qtr. - Collected for sales on credit (20%) 2,120 2nd Qtr. - Collection of remaining amount of Jan. sales (20%) $2,120 2nd Qtr. - Cash sales (60%) 7,380 2nd Qtr. - Collected for sales on credit (20%) 2,460 3rd Qtr. - Collection of remaining amount of Feb. sales (20%) $2,460 3rd Qtr. - Cash sales (60%) 7,740 3rd Qtr. - Collected for sales on credit (20%) 2,580 Total cash receipts from customers $8,480 $11,960 $12,780 $33,220 Calculate and show below the Accounts Receivable Balance as of March 31 Requirement 2 Revised Schedule of Cash Receipts from Customers January February March Total Accounts Receivable balance, March 31: Amount February - Credit sales (finish this . . . .

Answer 1

1.
Calculation of cash receipts for Armand for Jan, Feb and Mar
	January	February	March	Total
Sales	$10,600	$12,300	$12,900	$35,800
Cash sales - 60%	$6,360	$7,380	$7,740	$21,480
	10600*60%	12300*60%	12900*60%
Credit sales - 50%	$2,120	$2,460	$2,580	$7,160
	10600*40%*50%	12300*40%*50%	12900*40%*50%
Credit sales - 50%		$2,120	$2,460	$4,580
Next month		10600*40%*50%	12300*40%*50%
Total cash receipts	$8,480	$11,960	$12,780	$33,220
The balance of accounts receivable would be 50% of credit sales of march which would be collected in April
Accounts receivable	$2,580	12900*40%*50%
Thus, accounts receivable balance as on March 31 is $2,580.
2.
Calculation of cash receipts for Armand for Jan, Feb and Mar
	January	February	March	Total
Sales	$10,600	$12,300	$12,900	$35,800
Cash sales - 60%	$6,360	$7,380	$7,740	$21,480
	10600*60%	12300*60%	12900*60%
Credit sales - 60%	$2,544	$2,952	$3,096	$8,592
	10600*40%*60%	12300*40%*60%	12900*40%*60%
Credit sales - 30%		$1,272	$1,476	$2,748
Next month		10600*40%*30%	12300*40%*30%
Credit sales - 10%			$424	$424
Following month			10600*40%*10%
Total cash receipts	$8,904	$11,604	$12,736	$33,244
The balance of accounts receivable would include 40% of credit sales of March and 10% of credit sales of February
March credit sales	$2,064	12900*40%*40%
February credit sales	$492	12300*40%*30%
Total accounts receivable	$2,556
Thus, accounts receivable balance as on March 31 is $2,556.