Question

ArmandArmand

Company projects the following sales for the first three months of the​ year:

$ 12 comma 400$12,400

in

JanuaryJanuary​;

$ 15 comma 900$15,900

in

FebruaryFebruary​;

and

$ 11 comma 100$11,100

in

MarchMarch.

The company expects

6060​%

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

JanuaryJanuary

1. Round to the nearest dollar.

Requirement 1. Prepare a schedule of cash receipts for

ArmandArmand

for

JanuaryJanuary​,

FebruaryFebruary​,

and

MarchMarch.

What is the balance in Accounts Receivable on

MarchMarch

3131​?

​(Leave unused and zero balance account cells​ blank, do not enter​ "0".)

Cash Receipts from Customers
		January	February	March	Total
Total sales
		January	February	March	Total
Cash Receipts from Customers:
Accounts Receivable balance, January 1
January—Cash sales
January—Credit sales, collection of January sales in January
January—Credit sales, collection of January sales in February
February—Cash sales
February—Credit sales, collection of February sales in February
February—Credit sales, collection of February sales in March
March—Cash sales
March—Credit sales, collection of March sales in March
Total cash receipts from customers
Accounts Receivable balance, March 31:
March—Credit sales, collection of March sales in April

1.	Prepare a schedule of cash receipts for ArmandArmand for JanuaryJanuary​, FebruaryFebruary​, and MarchMarch. What is the balance in Accounts Receivable on MarchMarch 3131​?
2.	Prepare a revised schedule of cash receipts if receipts from sales on account are 6060​% in the month of the​ sale, 1010​% in the month following the​ sale, and 3030​% in the second month following the sale. What is the balance in Accounts Receivable on MarchMarch 3131​?

Answer 1

Solution:

(Amount in $)

PART A

1) Cash Schedule for the next 3 months

When 50% is received in the month of sale and 50% in the next month of sale.

Particular	Jan	Feb	March
Expected Total Sale	12,400	15,900	11,100
60% sale on a cash basis (A)	7,440	9,540	6,660
40% sale on a credit basis (B)	4,960	6,360	4,440
50 % of Credit sale collected in the month of sale (50% of B) (C)	2,480	3,180	2,220
50% of Credit sale collected in next month of sale (50% of B of the previous month) (D)	-	2,480	3,180
Total Cash receipts of the month (A+C+D)	9,920	15,200	12,060

2) Total Account Receivable on 31st March will be 2,220 ( 50% of the credit sale of march month).

PART B

1) Cash Schedule for the next 3 months

When 60% is received in the month of sale and 10% in the next month of sale and 30% in 2nd month of sale.

Particular	Jan	Feb	March
Expected Total Sale	12,400	15,900	11,100
60% sale on a cash basis (A)	7,440	9,540	6,660
40% sale on a credit basis (B)	4,960	6,360	4,440
60 % of Credit sale collected in the month of sale (60% of B) (C)	2,796	3,816	2,664
10% of Credit sale collected in next month of sale (10% of B of the previous month) (D)	-	496	636
30% of Credit sales collected in the 2nd month of original sale (30% of B of the previous month. (January) (E)	-	-	1,488
Total Cash receipts of the month (A+C+D+E)	10,236	13,852	11,448

2) Total Account Receivable on 31st March will be 3,684  ( 40% of the credit sale of march month + 30% for the month of Feb).

Note:

Note 1. For better understanding

The calculation for PART B Total Account Receivable

= 30% of 6,360 (as we have received combined 70% in Feb and March)+ 40% of 4,440 (as we have received only 60% of credit sale in month of march) = 3,684