Question

Village industries expects total sales for Jan, Feb, and Mar to be $300,000, $350,000, and $400,000 respectively. All sales are on credit. It expects to collect 60% of the sales in the month of sale and 35% in the following month.

a) Compute the cash collections from customers for Feb and Mar.

February: $  

March: $

b) Compute the accounts receivable for :

March: $  

April: $

Answer 1

• All working forms part of the answer
• Question says 60% + 35% is collected. This means 5% of sale is not collected and hence balance stays in Accounts receivables account.
• Workings

Working		Jan	Feb	Mar
A	Expected Sales	$                300,000.00	$               350,000.00	$        400,000.00
B = A x 60%	60% of sales	$                180,000.00	$               210,000.00	$        240,000.00
C = A x 35%	35% of sales	$                105,000.00	$               122,500.00	$        140,000.00
D = A x 5%	Accounts receivables addition	$                  15,000.00	$                  17,500.00	$          20,000.00

• Requirement 1, based on above

	February	March
Collection from:
Jan Sale	$                      105,000 (35%)
Feb Sale	$                      210,000 (60%)	$                     122,500 (35%)
Mar Sale		$                     240,000 (60%)
Total Cash Collections	$                      315,000 = Answer	$                     362,500 = Answer

• Requirement 2

	March	April
Accounts receivables from:
Jan Sale	$                        15,000 (5%)	$                        15,000 (5%)
Feb Sale	$                        17,500 (5%)	$                        17,500 (5%)
Mar Sale	$                     160,000 (40%)	$                        20,000 (5%)
Total Accounts receivables	$                      192,500 = Answer	$                        52,500 = ANswer