Question

Badlands, Inc. manufactures a household fan that sells for $40 per unit. All sales are on account, with 35 percent of sales collected in the month of sale and 65 percent collected in the following month. The data that follow were extracted from the company’s accounting records. •Badlands maintains a minimum cash balance of $21,000. Total payments in January 20x1 are budgeted at $225,000. •A schedule of cash collections for January and February of 20x1 revealed the following receipts for the period:

Badlands maintains a minimum cash balance of $21,000. Total payments in January 20x1 are budgeted at $225,000.

A schedule of cash collections for January and February of 20x1 revealed the following receipts for the period:

	Cash Receipts
	January			February
From December 31 accounts receivable	$	130,000
From January sales		88,000		$	160,000
From February sales					74,900

March 20x1 sales are expected to total 6,000 units.

Finished-goods inventories are maintained at 20 percent of the following month’s sales.

The December 31, 20x0, balance sheet revealed the following selected figures: cash, $23,700; accounts receivable, $130,000; and finished goods, $24,150.

Required:

Determine the number of units that Badlands sold in December 20x0.

Compute the sales revenue for March 20x1.

Compute the total sales revenue to be reported on Badlands’ budgeted income statement for the first quarter of 20x1.

Determine the accounts receivable balance to be reported on the March 31, 20x1, budgeted balance sheet.

Calculate the number of units in the December 31, 20x0, finished-goods inventory.

Calculate the number of units of finished goods to be manufactured in January 20x1.

Calculate the financing required in January, if any, to maintain the firm’s minimum cash balance.

Badlands maintains a minimum cash balance of $21,000. Total payments in January 20x1 are budgeted at $225,000.

A schedule of cash collections for January and February of 20x1 revealed the following receipts for the period:

	Cash Receipts
	January			February
From December 31 accounts receivable	$	130,000
From January sales		88,000		$	160,000
From February sales					74,900

March 20x1 sales are expected to total 6,000 units.

Finished-goods inventories are maintained at 20 percent of the following month’s sales.

The December 31, 20x0, balance sheet revealed the following selected figures: cash, $23,700; accounts receivable, $130,000; and finished goods, $24,150.

Required:

Determine the number of units that Badlands sold in December 20x0.

Compute the sales revenue for March 20x1.

Compute the total sales revenue to be reported on Badlands’ budgeted income statement for the first quarter of 20x1.

Determine the accounts receivable balance to be reported on the March 31, 20x1, budgeted balance sheet.

Calculate the number of units in the December 31, 20x0, finished-goods inventory.

Calculate the number of units of finished goods to be manufactured in January 20x1.

Calculate the financing required in January, if any, to maintain the firm’s minimum cash balance.

Badlands maintains a minimum cash balance of $21,000. Total payments in January 20x1 are budgeted at $225,000.

A schedule of cash collections for January and February of 20x1 revealed the following receipts for the period:

	Cash Receipts
	January			February
From December 31 accounts receivable	$	130,000
From January sales		88,000		$	160,000
From February sales					74,900

March 20x1 sales are expected to total 6,000 units.

Finished-goods inventories are maintained at 20 percent of the following month’s sales.

The December 31, 20x0, balance sheet revealed the following selected figures: cash, $23,700; accounts receivable, $130,000; and finished goods, $24,150.

Required:

Determine the number of units that Badlands sold in December 20x0.

Compute the sales revenue for March 20x1.

Compute the total sales revenue to be reported on Badlands’ budgeted income statement for the first quarter of 20x1.

Determine the accounts receivable balance to be reported on the March 31, 20x1, budgeted balance sheet.

Calculate the number of units in the December 31, 20x0, finished-goods inventory.

Calculate the number of units of finished goods to be manufactured in January 20x1.

Calculate the financing required in January, if any, to maintain the firm’s minimum cash balance.

Q1) December Sales Q2) March sales revenue Q3) first quarter sales revenue Q4) March 31 accounts receivable balance Q5) December 31 finished-goods inventory. Q6) finished goods to be manufactured in January Q7) financing required in January Q7) Calculate the financing required in January, if any, to maintain the firm’s minimum cash balance

Answer 1

1	December sales: 5000 units
	December sales revenue = $130000/65% = $200000
	Number of units sold = $200000/$40 = 5000
2	March sales revenue = 6000 units x $40 = $240000
3	Total sales revenue for first quarter of 20x1: $702000
	January sales revenue = $88000 + $160000 = $248000
	February sales revenue = $74900/35% = $214000
	March sales revenue = $240000
	Total sales revenue for first quarter of 20x1 = $248000 + $214000 + $240000 = $702000
4	Accounts receivable balance on March 31 = $240000 x 65% = $156000
5	Finished goods inventory on December 31, 20x0: 1240 units
	January sales = $248000/$40 = 6200 units
	Ending inventory for December = 20% x 6200 units = 1240
6	Finished goods to be manufactured in January: 6030 units
	Units to be manufactured = Sales + Desired ending inventory - Beginning inventory = 6200 + 1070 - 1240 = 6030
	Desired ending inventory = 20% of February sales = 20% x ($214000/$40) = 20% x 5350 = 1070

7. Financing required in January: $4300

Beginning cash balance	23700
Add: Cash collections ($130000 + $88000)	218000
Total cash available	241700
Less: Cash payments	225000
Cash balance before financing	16700
Minimum cash balance required	21000
Financing required $	4300