Budgeted Sales Budgeted D.M. Purchases April $300,000 $45,000 May 320,000 54,000 June 370,000 60,000 Moorcroft's 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. Moorcroft's 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. Instructions a. Prepare a schedule of expected collections from customers for June. b. Prepare a schedule of expected payments for direct materials for June. c. Moorcroft's 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 1) Prepare a schedule of expected collections from customers for June. How did these changes impact cash collections? Would it be worth paying the collector $1,000 per month d. 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 company's payment pattern,
Budgeted Sales Budgeted D.M. Purchases April $300,000 $45,000 May 320,000 54,000 June 370,000 60,000 Moorcroft's 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. Moorcroft's 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. Instructions a. Prepare a schedule of expected collections from customers for June. b. Prepare a schedule of expected payments for direct materials for June. c. Moorcroft's 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 1) Prepare a schedule of expected collections from customers for June. How did these changes impact cash collections? Would it be worth paying the collector $1,000 per month d. 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 company's payment pattern,
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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Transcribed Image Text:Instructions
a. Prepare a schedule of expected collections from customers for
June.
b. Prepare a schedule of expected payments for direct materials for
June.
c. Moorcroft's 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 1) Prepare a schedule of
expected collections from customers for June. How did these
changes impact cash collections? Would it be worth paying the
collector $1,000 per month
d. 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 company's payment pattern.
1. Prepare a schedule of expected payments for direct
materials for June.
2. How did these changes impact the cash payments for June?
Transcribed Image Text:Budgeted Sales
Budgeted D.M.
Purchases
April
$300,000
$45,000
May
320,000
54,000
June
370,000
60,000
Moorcroft's 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. Moorcroft's 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.
Instructions
a. Prepare a schedule of expected collections from customers for
June.
b. Prepare a schedule of expected payments for direct materials for
June.
c. Moorcroft's 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 1) Prepare a schedule of
expected collections from customers for June. How did these
changes impact cash collections? Would it be worth paying the
collector $1,000 per month
d. 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 company's payment pattern.
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Interpretation of Data:
VIEWRequirement 1: Preparing a Schedule of Expected Cash Collection for the month of June:
VIEWRequirement 2: Preparing Schedule of Expected cash payments for the month of June:
VIEWRequirement 3: Preparing June month's collection post controller's suggestion:
VIEWRequirement 4: Computation of Cash payment for the month of June after Controller's suggestion:
VIEWBenefit of controller's Suggestion:
VIEW
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