Question

ArmandCompany projects the following sales for the first three months of the year: $11,200 in January; $10,100 in February; and $15,800 in March. The company expects 80 % 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.

Requirements:

1.
Prepare a schedule of cash receipts for Armand for January, February, andMarch. 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??

Answer 1

1) Cash Receipts :-

Particulars	January	February	March
Sales	$11200	$10100	$15800
Cash Sales(80% of Sales)(A)	$8960	$8080	$12640
Cash Receive in month of sales(50% of Credit Sales)(B)	$1120	$1010	$1580
Cash Receive in following month (50% of Credit sales)(C)		$1120	$1010
Total Cash Receipts(A+B+C)	$10080	$10210	$15230

Accounts Receivable on March 31:-

= 50% of March Credit Sales

= $1580

2). Cash Receipts :-

Particulars	January	February	March
Sales	$11200	$10100	$15800
Cash Sales(80% of Sales)(A)	$8960	$8080	$12640
Cash Receive in month of sales(60% of Credit Sales)(B)	$1344	$1212	$1896
Cash Receive in following month (30% of Credit sales)(C)		$672	$606
Cash Receive in Second Following month(10% of Credit Sales) (D)			$224
Total Cash Receipts (A+B+C+D)	$10304	$9964	$15366

Account Receivable on March 31 :-

Particulars	Amount($)
10% of Feb. Credit Sales ($2020*10%)	202
40% of March Credit Sales ($3160*40%)	1264
Total Account Receivable	1466