Answered: Moorcroft Company's budgeted sales and…

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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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.

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		$	$	$

Moorcroft Company's budgeted sales and direct materials purchases are as follows:
Budgeted Sales Budgeted D.M. Purchases
April
$299,000
$48,000
May
330,000
49,000
June
398,000
54,000

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Follow-up Question

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.
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
$
173420
$
191400
$
i
86710
i
$
173420
299000
330000
398000
$
i
340500
$
230840
99000
32292
202932

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