Ed’s Waterbeds has made the following sales projections for the next six months. All sales are credit sales. March $ 44,000 June $ 48,000 April 50,000 July 56,000 May 39,000 August 58,000 Sales in January and February were $47,000 and $46,000 respectively. Experience has shown that 5 percent of total sales are uncollectible, 40 percent are collected in the month of sale, 50 percent are collected in the following month, and 5 percent are collected two months after sale. a. Prepare a monthly cash receipts schedule for the firm for March through August. Ed’s Waterbeds Cash Receipts Schedule January February March April May June July August Sales $ $ $ $ $ $ $ $ Collections of current sales Collections of prior month's sales Collections of sales 2 months earlier Total cash receipts $ $ $ $ $ $ b. Of the sales expected to be made during the six months from March to August, how much will still be uncollected at the end of August? How much of this is expected to be collected later? Amount Uncollected $ Expected to be collected $

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Ed’s Waterbeds has made the following sales projections for the next six months. All sales are credit sales.


March	$	44,000	June	$	48,000
April		50,000	July		56,000
May		39,000	August		58,000

Sales in January and February were $47,000 and $46,000 respectively.

Experience has shown that 5 percent of total sales are uncollectible, 40 percent are collected in the month of sale, 50 percent are collected in the following month, and 5 percent are collected two months after sale.

a. Prepare a monthly cash receipts schedule for the firm for March through August.

Ed’s Waterbeds Cash Receipts Schedule
	January	February	March	April	May	June	July	August
Sales	$	$	$	$	$	$	$	$
Collections of current sales
Collections of prior month's sales
Collections of sales 2 months earlier

Total cash receipts			$	$	$	$	$	$

b. Of the sales expected to be made during the six months from March to August, how much will still be uncollected at the end of August? How much of this is expected to be collected later?