Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN: 9781305654174
Author: Gary A. Porter, Curtis L. Norton
Publisher: Cengage Learning
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Chapter 2, Problem 2.12MCP
To determine
Concept Introduction:
To Calculate: Cash availability for payment of dividend.
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Accounting
Dream Big Pillow Co., pays 65% of its purchases
in the month of purchase, 30% the month after
the purchase, and 5% in the second month
following the purchase. It made the following
purchases at the end of 2017 and the beginning
of 2018:
Nov. 2017 Dec. 2017 Jan. 2018 Feb. 2018 Mar.
2018
$59,000 $52,000. $36,000 $38,000 $44,000
Given the above purchases, how much cash will
be paid in quarter 2018? Cash paid $fill in the
blank 1.
(Pro forma accounts receivable balance calculation) The accounts receivable for Pastors Brewing Company on March 31, 2016 was $22,500. Firm sales are roughly evenly split between credit and cash sales,
with 40 percent of the credit sales collected in the month after the sale and the remainder 2 months after the sale. Historical and projected sales for the brewing company are given here:
end of April?
a. Under these circumstances, what should the balance in accounts receivable be at
b. How much cash did Pastors' realize during April from sales and collections?
a. Under these ci
$(Round to f
t
Data table
MONTH
January
February
SALES
$20,000
$25,000
MONTH
March
O
SALES
$30,000
$34,000
April (projected)
(Click on the icon located on the top-right corner of the data table above in order to copy its contents
into a spreadsheet.)
D
X
Block, S., Hirt, G., & Danielsen, B. (2017). Foundations of Financial Management. New York, NY: McGraw-Hill Education. 16th edition.
Chapter 7, Problem #11:
Route Canal Shipping Company has the following schedule for aging of accounts receivable:
A. Fill in column (4) for each month. (Please see uploaded image of chart)
B. If the firm had $1,500,000 in credit sales over the four-month period, compute the average collection period. Average daily sales should be based on a 120 day-period.
C. If the firm likes to see it bills collected in 35 days, should it be satisfied with the average colleciton period?
D. Disregarding your answer to part C and considering the aging schedule for accounts receivable, should the company be satisfied?
E. What additional information does the againg schedule bring to the company that the average collection period may not show?
Thank you in advance!
Chapter 2 Solutions
Financial Accounting: The Impact on Decision Makers
Ch. 2 - Read each definition below and write the number of...Ch. 2 - Prob. 2.1ECh. 2 - The Operating Cycle Two Wheeler Cycle Shop buys...Ch. 2 - Classification of Financial Statement Items Regal...Ch. 2 - Current Ratio Baldwin Corp. reported the following...Ch. 2 - Classification of Assets and Liabilities Indicate...Ch. 2 - Selling Expenses and General and Administrative...Ch. 2 - Prob. 2.7ECh. 2 - Income Statement Ratio The income statement of...Ch. 2 - Statement of Retained Earnings Landon Corporation...
Ch. 2 - Components of the Statement of Cash Flows Identify...Ch. 2 - Prob. 2.11ECh. 2 - Prob. 2.12MCECh. 2 - Prob. 2.13MCECh. 2 - Prob. 2.14MCECh. 2 - Materiality Joseph Knapp, a newly hired accountant...Ch. 2 - Costs and Expenses The following costs are...Ch. 2 - Prob. 2.3PCh. 2 - Prob. 2.4PCh. 2 - Working Capital and Current Ratio The balance...Ch. 2 - Single-Step Income Statement The following income...Ch. 2 - Multiple-Step Income Statement and Profit Margin...Ch. 2 - Statement of Cash Flows Colorado Corporation was...Ch. 2 - Basic Elements of Financial Reports Comparative...Ch. 2 - Prob. 2.10MCPCh. 2 - Prob. 2.11MCPCh. 2 - Prob. 2.12MCPCh. 2 - Prob. 2.1APCh. 2 - Prob. 2.2APCh. 2 - Prob. 2.3APCh. 2 - Prob. 2.4APCh. 2 - Working Capital and Current Ratio The balance...Ch. 2 - Single-Step Income Statement The following income...Ch. 2 - Prob. 2.7APCh. 2 - Prob. 2.8APCh. 2 - Prob. 2.9APCh. 2 - Comparability and Consistency in Income Statements...Ch. 2 - Prob. 2.12AMCPCh. 2 - Prob. 2.1DCCh. 2 - Prob. 2.2DCCh. 2 - Analysis of Cash Flow for a Small Business...Ch. 2 - Prob. 2.4DCCh. 2 - The Expenditure Approval Process Roberto is the...Ch. 2 - Prob. 2.6DC
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- Knight Roundtable Co. had annual credit sales of $1,080,000 and an average collection period of 32 days in 2018. Assume a 360-day year. What were the company’s average accounts receivable balance? Accounts receivable are equal to the average daily credit sales times the average collection period. Fisk Corporation is trying to improve its inventory control system and has installed an online computer at its retail stores. Fisk anticipates sales of 49,000 units per year, an ordering cost of $8 per order, and carrying costs of $1.60 per unit.arrow_forwardBingo Inc. sells on term 3/20, net 40. Total sale for the year are P1,200,000 on which 40% is cash sales. 30% pays on the 20th day and take discounts while the remaining customers always pay on time. 1. What is the average amount of accounts receivable? (Use 360-day year)arrow_forward(Pro forma accounts receivable balance calculation) The accounts receivable for Pastors Brewing Company on March 31, 2016 was $24,100. Firm sales are roughly evenly split between credit and cash sales, with 40 percent of the credit sales collected in the month after the sale and the remainder 2 months after the sale. Historical and projected sales for the brewing company are given here: a. Under these circumstances, what should the balance in accounts receivable be at the end of April? b. How much cash did Pastors' realize during April from sales and collections? a. Under these circumstances, what should the balance in accounts receivable be at the end of April? (Round to the nearest dollar.) $ Data table SALES $32,000 $38,000 April (projected) (Click on the icon located on the top-right corner of the data table above in order to copy its contents into a spreadsheet.) MONTH January February SALES $22,000 $27,000 MONTH March Xarrow_forward
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- The Morning Jolt Coffee Company has projected the following quarterly sales amounts for the coming year: 01 Sales $ 330 Q2 $ 390 Beginning receivables Sales Cash collections Ending receivables a. Accounts receivable at the beginning of the year are $360. The company has a 45-day collection period. Calculate cash collections in each of the four quarters by completing the following: Note: Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32. Beginning receivables Sales Cash collections Ending receivables Q3 $ 450 Show Transcribed Text Beginning receivables Sales Cash collections Ending receivables Q1 Q1 Q1 330 04 $ 600 330 b. Accounts receivable at the beginning of the year are $360. The company has a 60-day collection period. Calculate cash collections in each of the four quarters by completing the following: Note: Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32. 330 Q2 Q2 Q2 390 390 390…arrow_forwardthe following are forecasts of sales and purchases for a company. Sales Purchases April P 80,000 P 30,000 May 90,000 40,000 June 85,000 30,000 All sales are on credit. Records show that 70% of the customers pay the month of the sale 20% pay the month after the sale, and the remaining 10% pay the second month after the sale. Purchases are all paid the following month at a 2 percent discount. cash disbursements for operating expenses in June were P5,000. 1. Prepare a schedule of cash receipts and disbursements for June.arrow_forwardMurtaugh Manufacturing sells on terms of 2/15, net 40. Total annual sales are $950,000. 40% of the customers pay on the 15th day and take discounts, and the remainder pay, on average, 50 days after their purchases. All sales and receivables are recorded net of discounts, regardless of whether or not discounts are actually taken. What is the firm's accounts receivable balance, based on a 365-day year? Select one: a. $88,526 b. $85,123 c. $93,699 d. $82,708arrow_forward
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