Question
In: Finance
Sequoia Furniture Company’s sales over the past three months, half of which are for cash, were...
Sequoia Furniture Company’s sales over the past three months, half of which are for cash, were as follows:
| March | April | May |
| $430,000 | $680,000 | $550,000 |
a. Assume that Sequoia’s collection period is 60 days. What would be its cash receipts in May? What would be its accounts receivable balance at the end of May?
Cash receipts
Accounts receivable balance
b. Now assume that Sequoia’s collection period is 45 days. What would be its cash receipts in May? What would be its accounts receivable balance at the end of May?
|
Solutions
Expert Solution
Answer a.
Collection period is 60 days which means credit sale during March will be collected in May and April credit sale will be collected in June.
Cash receipts in May = Cash sales in May + Credit sales in
March
Cash receipts in May = $275,000 + $215,000
Cash receipts in May = $490,000
Accounts receivable in May = Credit sales in April + Credit
sales in May
Accounts receivable in May = $340,000 + $275,000
Accounts receivable in May = $615,000
Answer b.
Collection period is 45 days which means credit sale during March will be collected in April and April credit sale will be collected in May.
Cash receipts in May = Cash sales in May + Credit sales in
April
Cash receipts in May = $275,000 + $340,000
Cash receipts in May = $615,000
Accounts receivable in May = Credit sales in May
Accounts receivable in May = $275,000
jeff jeffy answered 7 months agoRelated Solutions
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