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Expected Cash Collections

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Peak sales for Midwest Products, a wholesale distributor of leaf rakes, occur in August. The company's sales budget for the third quarter showing these peak sales is given below:

July August September Total
Budgeted sales (all on account) $567,000 $789,000 $461,000 $1,817,000

From past experience, the company has learned that 25% of a month's sales are collected in the month of sale, another 70% are collected in the month following sale, and the remaining 5% are collected in the second month following sale. Bad debts are negligible and can be ignored. May sales totaled $429,000, and June sales totaled $528,000.

Requirement 1:
Prepare a schedule of expected cash collections from sales, by month and in total for the third quarter.
July August September Total
May sales $ $ $ $
June sales
July sales
August sales
September sales
Total cash collections $ $ $ $

Requirement 2:
Assume that the company will prepare a budgeted balance sheet as of September 30. Compute the accounts receivable as of that date.

Accounts Receivable = $

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The solution explains how to prepare a schedule of expected cash collections

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Binghamton Film Corporation: Expected Cash Collections

The following information is from Binghamton Film Corporation's financial records.

Month Sales Purchases
April $ 72,000 $ 42,000
May 66,000 48,000
June 60,000 36,000
July 78,000 54,000

Collections from customers are normally 70 percent in the month of sale, 20 percent in the month following the sale, and 9 percent in the second month following the sale. The balance is expected to be uncollectible. All purchases are on account. Management takes full advantage of the 2 percent discount allowed on purchases paid for by the tenth of the following month. Purchases for August are budgeted at $60,000, and sales for August are forecasted at $66,000. Cash disbursements for expenses are expected to be $14,400 for the month of August. The company's cash balance on August 1 was $22,000.

Required:
1. Prepare the expected cash collections schedule during August.

BINGHAMTON FILM CORPORATION
EXPECTED CASH COLLECTIONS
AUGUST

Month Sales Percent Expected collections
June $ ? ? % $ ?
July ? ? % ?
August ? ? % ?

___________

Total $ $ ????

2. Prepare the expected cash disbursements schedule during August.

BINGHAMTON FILM CORPORATION
EXPECTED CASH COLLECTIONS
AUGUST

July purchases to be paid in August $ ------------------------------------- ??

(Click to select)Add : 2% cash discountLess : 2% cash discount

Net $ ----------------------------------------------------------------------- ???

Cash disbursements for expenses ------------------------------------ ???

________
Total $ -------------------------------------------------------------------- $ ???

3. Calculate the expected cash balance on August 31.

Expected cash balance $ ???

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