22-8 Monitoring of Receivables

The Russ Fogler Company, a small manufacturer of cordless telephones, began operations on January 1. Its credit sales for the first 6 months of operations were as follows:

Month:

Credit Sales:

January

$60,000

February

$96,000

March

$150,000

April

$108,000

May

$144,000

June

$180,000

Throughout this entire period, the firm's credit customer maintained a constant payments pattern: 10% paid in the month of sale, 40% paid in the first month following the sale, and 50% paid in the second month following the sale.

a. What was Fogler's receivables balance at the end of March and at the end of June?

b. Assume 90 days per calendar quarter. What were the average daily sales (ADS) and days sales outstanding (DSO) for the first quarter and for the second quarter? What were the cumulative ADS and DSO for the first half-year?

c. Construct an aging schedule as of June 30. Use account ages of 0-30, 31-60, and 61-90 days.

d. Construct the uncollected balances schedule for the second quarter as of June 30.