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 $408,000 April $658,000 May $528,000
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?
- Cash Receipts:?
- Accounts receivable balance:?
Solutions
Expert Solution
| 60 days collection period mean credit sales for March would be paid in May | |||||||
| March | April | May | Total | ||||
| Sales | $408,000 | $658,000 | $528,000 | $1,594,000 | |||
| Cash sales (50%) | $204,000 | $329,000 | $264,000 | $797,000 | |||
| Credit sales collection | $204,000 | $204,000 | |||||
| 408000*50% | |||||||
| Total cash collection | $204,000 | $329,000 | $468,000 | $1,001,000 | |||
| Accounts receivable | $204,000 | $533,000 | $593,000 | ||||
| Thus, total cash collection for May is $468,000 and accounts receivable balance is $593,000 | |||||||
| 45 days collection period mean payment for March would be paid in mid April | |||||||
| March | April | May | Total | ||||
| Sales | $408,000 | $658,000 | $528,000 | $1,594,000 | |||
| Cash sales (50%) | $204,000 | $329,000 | $264,000 | $797,000 | |||
| Credit sales collection | $204,000 | $329,000 | $533,000 | ||||
| 408000*50% | 658000*50% | ||||||
| Total cash collection | $204,000 | $533,000 | $593,000 | $1,330,000 | |||
| Accounts receivable | $204,000 | $329,000 | $264,000 | ||||
| Thus, total cash collection for May would be $593,000 and accounts receivable balance would be $264,000 | |||||||
jeff jeffy answered 1 year agoRelated Solutions
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1
105
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130
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105...
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140
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15
42
14
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17
43
14.33333333
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11
42
14
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14
42
14
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