Question

Badlands, Inc. manufactures a household fan that sells for $20 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 $20,000. 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 receivable $ 102,000 From January sales 90,000 $ 142,000 From February sales 75,600 March 20x1 sales are expected to total 9,500 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, $23,900; accounts receivable, $102,000; and finished goods, $24,450.

Compute the total sales revenue to be reported on Badlands’ budgeted income statement for the first quarter of 20x1.

Determine the accounts receivable balance to be reported on the March 31, 20x1, budgeted balance sheet.

Calculate the number of units in the December 31, 20x0, finished-goods inventory.

Calculate the number of units of finished goods to be manufactured in January 20x1.

Calculate the financing required in January, if any, to maintain the firm’s minimum cash balance.

Answer 1

ANSWER:

1)

Total Sales Revenue to be reported :

PARTICULARS	AMOUNT (IN $)
January cash sales	90000
Collection on account
January	142000
February (75600/40%)	189000
March (9500*20)*	190000
Total Sales Revenue	611000

• Sell price per unit is $20

2)

Account Receivable Balance on March 31,20X1 :

PARTICULARS	AMOUNT(IN $)
Sales (a)	190000
Receivables % (b)	60 %
Account Receivable (a*b)	114000

3)

Number of Units in Dec 31, 20X0 finished goods Inventory :

PARTICULARS	AMOUNT (IN $ )
January cash sales	90000
January Credit Sales	142000
Total Sales	232000
Unit price	20
Total Sales in Units	11600
Finished Goods %	20%
Units in Finished goods Inventory	2320

4)

Number of Units of Finished Goods to be Manufactured in January 20X1 :

First Calculate the units in finished goods inventory

PARTICULARS	AMOUNT
Febuary Sales (a)	189000
Unit price (b)	20
Total Sales in Units (a/b)	9450
Finished Goods %	20%
Units in Finished Goods inventory	1890

Now, Calculate number of units as follows :

PARTICULARS	AMOUNT
January sales	11600
January 31 Inventory	1890
Less : Dec 31 inventory	2320
Units of Finished Goods	11170

THANKS..