Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Moorcroft Companys budgeted sales and direct materials purchases are as follows: Budgeted Sales Budgeted D.M. Purchases April $281,000 $46,000 May 343,000 52,000 June 396,000 62,000

Moorcroft Companys budgeted sales and direct materials purchases are as follows:

Budgeted Sales

Budgeted D.M. Purchases

April

$281,000

$46,000

May

343,000

52,000

June

396,000

62,000

Moorcrofts sales are 40% cash and 60% credit. Credit sales are collected 20% in the month of sale, 50% in the month following sale, and 26% in the second month following sale; 4% are uncollectible. Moorcrofts purchases are 50% cash and 50% on account. Purchases on account are paid 40% in the month following the purchase and 60% in the second month following the purchase.

Prepare a schedule of expected collections from customers for June.

Moorcroft Company Schedule of Expected Collections from Customers

Sales

April

May

June

April

$

$

$

$

May

June

Total Collections

$

$

$

Prepare a schedule of expected payments for direct materials for June.

Moorcroft Company Schedule of Expected Payment for Direct Materials

Purchases

April

May

June

April

$

$

$

$

May

June

Total Collections

$

$

$

Moorcrofts assistant controller suggested that Moorcroft hire a part time collector to encourage customers to pay more promptly and to reduce the amount of uncollectible accounts. Sales are still 40% cash and 60% credit but the assistant controller predicted that this would cause credit sales to be collected 30% in the month of the sale, 50% in the month following sale, and 18% in the second month following sale; 2% are uncollectible. Prepare a schedule of expected collections from customers for June. How did these changes impact cash collections?

Moorcroft Company Schedule of Expected Collections from Customers

Sales

April

May

June

April

$

$

$

$

May

June

Total Collections

$

$

$

Would it be worth paying the collector $1,000 per month?

It _____ not be worth paying the collector $1,000 per month to improve the cash collections of the company.

The assistant controller also suggested that the company switch their purchases to 40% cash and 60% on account to help stretch out their cash payments. There is no additional interest charge to do this and Moorcroft is still paying their bills on time. There is no change to the companys payment pattern. Prepare a schedule of expected payments for direct materials for June.

Moorcroft Company Schedule of Expected Payment for Direct Materials

Purchases

April

May

June

April

$

$

$

$

May

June

Total Collections

$

$

$

How did these changes impact the cash payments for June?

Cash payments increaseddecreased by $ .

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Database Security And Auditing Protecting Data Integrity And Accessibility

Authors: Hassan A. Afyouni

1st Edition

0619215593, 9780619215590

More Books

Students also viewed these Accounting questions