Question
All sales are on credit. Recent experience shows that 28% of credit sales is collected in the month of the sale, 42% in the month
All sales are on credit. Recent experience shows that 28% of credit sales is collected in the month of the sale, 42% in the month after the sale, 28% in the second month after the sale, and 2% proves to be uncollectible. The product's purchase price is $110 per unit. All purchases are payable within 13 days. Thus, 60% of purchases made in a month is paid in that month and the other 40% is paid in the next month. The company has a policy to maintain an ending monthly inventory of 19% of the next month's unit sales plus a safety stock of 115 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,788,000 and are paid evenly throughout the year in cash. The company's minimum cash balance at month-end is $130,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $130,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 14% interest rate. On May 31, the loan balance is $42,500, and the company's cash balance is $130,000.
Aztec Company sells its product for $180 per unit. Its actual and projected sales follow.
April (actual) Units 4,500 Dollars $810,000
May (actual) Units 3,600 Dollars $648,000
June (budgeted) Units 7,000 Dollars $1,260,000
July (budgeted) Units 8,000 Dollars $1,440,0000
August (budgeted) Units 4,200 Dollars $756,000
1. Prepare a table that shows the computation of cash collections of its credit sales (accounts receivable) in each of the months of June and July. Percent collected in Credit Sales from April , May, June, July August is what is needed.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started