Question

In: Accounting

The projected balance of accounts receivable at the end of the first year of operations is?

A family friend, Mr. Burn Out availed of the early retirement scheme offered by his employer. He said that he was already tired of the same routine of spending eight full hours in an office doing the same thing for the last twenty years.

Mr. Burn Out plans to get into the field of entrepreneurship. He would invest part of his retirement pay in a business that would deal with the sale of medical supplies to local clinics and hospitals.

When Mr. Burn Out learned that you are an accountant, he confessed that he is excited with his planned investment project, but very much afraid because he cannot afford to fail and lose his hard-earned retirement pay. 

You advised that a Feasibility Study be prepared for his planned investment project. The study, you said, would determine the viability of his proposed business undertaking. it would cover key areas, such as marketing, production or purchasing, and finance, among others. You emphasized that the financial aspect is the most critical of them all. 

Mr. Burn Out requested you to prepare a feasibility study for his proposed business. You immediately started and gathered the following relevant data.

 1. Projected sales for the first year of operations are $288,000, spread evenly during the year. All sales will be on account with an average collection period of one month.

2. The cost ratio will be 60% of sales.

3. At the end of the first year, the acid-test ratio will be 1:1, while the current ratio will be 2:1.

4. Once the business is underway, purchases will replace the stock sold each month. The average payment period for accounts payable arising from the purchases of merchandise will be two (2) months.  

5. Mr. Burn Out will open an account with the nearest bank and deposit $260,000 to start the business. 

6. Various fixed assets will be acquired for cash at a total cost of $240,000. These fixed assets will be depreciated at the rate of 10% per year using the straight-line method. 

7. Operating expenses, other than depreciation, are estimated at $70,000 per year. There will be no accruals and prepayment at year-end.

8. Mr. Burn Out will make drawings in excess of the amount necessary to meet the above plans. 

 

Question: The projected balance of accounts receivable at the end of the first year of operations is?

Solutions

Expert Solution

Question: The projected balance of accounts receivable at the end of the first year of operations is?

Computation:

Average sales or accounts receivable per month  
    (288,000/12 months) $24,000
Multiply by: Average collection period 1 month
Projected balance of accounts receivable $24,000

 

Here are the information used:

  • Projected sales for the first year of operations are $288,000, spread evenly during the year.
  • All sales will be on account with an average collection period of one month.

The projected balance of accounts receivable at the end of the first year of operations is $24,000. 

Related Solutions

The projected balance of inventories at the end of the first year of operations is?
A family friend, Mr. Burn Out availed of the early retirement scheme offered by his employer. He said that he was already tired of the same routine of spending eight full hours in an office doing the same thing for the last twenty years. Mr. Burn Out plans to get into the field of entrepreneurship. He would invest part of his retirement pay in a business that would deal with the sale of medical supplies to local clinics and hospitals....
What is the projected cash balance at the end of the first year of operations?
A family friend, Mr. Burn Out availed of the early retirement scheme offered by his employer. He said that he was already tired of the same routine of spending eight full hours in an office doing the same thing for the last twenty years. Mr. Burn Out plans to get into the field of entrepreneurship. He would invest part of his retirement pay in a business that would deal with the sale of medical supplies to local clinics and hospitals....
The projected balance of accounts payable at the end of the first year of operation is?
A family friend, Mr. Burn Out availed of the early retirement scheme offered by his employer. He said that he was already tired of the same routine of spending eight full hours in an office doing the same thing for the last twenty years. Mr. Burn Out plans to get into the field of entrepreneurship. He would invest part of his retirement pay in a business that would deal with the sale of medical supplies to local clinics and hospitals....
The projected balance sheet as of the end of the first year of operations will show an owners' equity balance of?
A family friend, Mr. Burn Out availed of the early retirement scheme offered by his employer. He said that he was already tired of the same routine of spending eight full hours in an office doing the same thing for the last twenty years. Mr. Burn Out plans to get into the field of entrepreneurship. He would invest part of his retirement pay in a business that would deal with the sale of medical supplies to local clinics and hospitals....
As of the end of the first year of operations, the projected total current assets is?
A family friend, Mr. Burn Out availed of the early retirement scheme offered by his employer. He said that he was already tired of the same routine of spending eight full hours in an office doing the same thing for the last twenty years. Mr. Burn Out plans to get into the field of entrepreneurship. He would invest part of his retirement pay in a business that would deal with the sale of medical supplies to local clinics and hospitals....
A company’s year-end balance in accounts receivable is $2,000,000. The allowance for uncollectible accounts had a...
A company’s year-end balance in accounts receivable is $2,000,000. The allowance for uncollectible accounts had a beginning-of-year credit balance of $30,000. An aging of accounts receivable at the end of the year indicates a required allowance of $38,000. If bad debt expense for the year was $40,000 and if credit sales for the year were $8,200,000 and $7,950,000 was collected from credit customers, what was the beginning-of-year balance in accounts receivable?
At the end of the current year, the accounts receivable account has a debit balance of...
At the end of the current year, the accounts receivable account has a debit balance of $932,000 and sales for the year total $10,570,000. The allowance account before adjustment has a debit balance of $12,600. Bad debt expense is estimated at 1/2 of 1% of sales. The allowance account before adjustment has a debit balance of $12,600. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $40,300. The allowance account before adjustment has a credit...
At the end of the current year, Accounts Receivable has a balance of $969,540 Allowance for...
At the end of the current year, Accounts Receivable has a balance of $969,540 Allowance for Doubtful Accounts has a credit balance of $5,287 and sales for the year total $2,224,000. Bad debt expense is estimated at ½ of 1% of sales. a. Determine the amount of the adjusting entry for bad debt expense. $ b. Determine the adjusted balances of Accounts Receivable, Allowance for Doubtful Accounts, and Bad Debt Expense. Adjusted Balance Accounts Receivable $ Allowance for Doubtful Accounts...
At the end of the current year, the accounts receivable account has a debit balance of...
At the end of the current year, the accounts receivable account has a debit balance of $1,095,000 and sales for the year total $12,420,000. The allowance account before adjustment has a debit balance of $14,800. Bad debt expense is estimated at 3/4 of 1% of sales. The allowance account before adjustment has a debit balance of $14,800. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $47,400. The allowance account before adjustment has a credit...
Problem 2.            At the end of the current year, Accounts Receivable has a balance of...
Problem 2.            At the end of the current year, Accounts Receivable has a balance of $550,000; Allowance for Doubtful Accounts has a credit balance of $5,500; and net sales for the year total $2,500,000. Using the aging method (analysis of receivables), the proper balance of Allowance for Doubtful Accounts is estimated as $25,000. Determine the amount of the adjusting entry for uncollectible accounts and journalize the entry. Date                      Account Title                                               Debit                   Credit Determine the adjusted balances of the following...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT