Question

Exercise 1) Accountics Corp. expects service revenue in the next 6 months as follows: November $216,000 February $195,000 December $355,000 March $370,000 January $280,000 April $555,000 Prior experience has shown that the following collections are made:  22.77 percent of a month’s revenue is collected in the month the service is performed  25.03 percent in the month following the service being performed  18.99 percent in the second month following the service being performed  13.13 percent in the third month following the service being performed  7.82 percent in the fourth month following the service being performed  Remainder is collected in the fifth month following the service being performed September and October service revenues were $175,000 and $190,000 respectively. Past experience shows that 3.33 percent of revenues are never collected (i.e., bad debts). Required: Estimate budgeted cash receipts (service revenue collected) for February, March, and April.

Answer 1

Sollution

Schedule of expected cash collection--Accountics Corp. expects
Particulars	Working	February	Working	March	Working	April
Cash received for September service revenue	($175000*8.93%)	$15,627.50	-	$0.00	-	$0.00
Cash received for October service revenue	($190000*7.82%)	$14,858.00	($190000*8.93%)	$16,967.00	-	$0.00
Cash received for November service revenue	($216000*13.13%)	$28,360.80	($216000*7.82%)	$16,891.20	($216000*8.93%)	$19,288.80
Cash received for Decemberservice revenue	($355000*18.99%)	$67,414.50	($355000*13.13%)	$46,611.50	($355000*7.82%)	$27,761.00
Cash received for January service revenue	$280000*25.03%)	$70,084.00	$280000*18.99%)	$53,172.00	$280000*13.13%)	$36,764.00
Cash received for February service revenue	($195000*22.77%)	$44,401.50	($195000*25.03%)	$48,808.50	($195000*18.99%)	$37,030.50
Cash received for March service revenue	-	$0.00	($370000*22.77%)	$84,249.00	($370000*25.03%)	$92,611.00
Cash received for April service revenue	-	$0.00	-	$0.00	($555000*22.77%)	$126,373.50
Budgeted Cash Receipt		$240,746.30		$266,699.20		$339,828.80