The following information was extracted from ABC Ltd’s financial statements for the year ended 31 December 2019. Sales on 30 November 2019 were K100 million and K110 million on 31 December 2019. For the year 2020, sales are expected to double at a constant monthly rate. 80% of the sales made are on account; the remainder on cash. From past experience, 5% of the receivables have turned out to be irrecoverable. Credit customers pay as follows: 75% in the month following the sale; 15% two months after the sale month. Inventory levels are maintained at 20% of the following month’s sales. Accounts payables are at settled at 30 days after purchase. Required: Prepare a collections schedule for the three-month period from January to March 2020.
The following information was extracted from ABC Ltd’s financial statements for the year ended 31 December 2019. Sales on 30 November 2019 were K100 million and K110 million on 31 December 2019. For the year 2020, sales are expected to double at a constant monthly rate. 80% of the sales made are on account; the remainder on cash. From past experience, 5% of the receivables have turned out to be irrecoverable. Credit customers pay as follows: 75% in the month following the sale; 15% two months after the sale month. Inventory levels are maintained at 20% of the following month’s sales. Accounts payables are at settled at 30 days after purchase. Required: Prepare a collections schedule for the three-month period from January to March 2020.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
The following information was extracted from ABC Ltd’s financial statements for the year ended 31 December 2019.
- Sales on 30 November 2019 were K100 million and K110 million on 31 December 2019. For the year 2020, sales are expected to double at a constant monthly rate.
- 80% of the sales made are on account; the remainder on cash.
- From past experience, 5% of the receivables have turned out to be irrecoverable.
- Credit customers pay as follows:
- 75% in the month following the sale;
- 15% two months after the sale month.
- Inventory levels are maintained at 20% of the following month’s sales.
- Accounts payables are at settled at 30 days after purchase.
Required:
- Prepare a collections schedule for the three-month period from January to March 2020.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education