Rainbow Legacy Ltd has the following balances at 31^st December 2019: Cash $46,000; accounts receivable $34,000 ($10,000 from November and $24,000 from December) ; merchandise inventory $40,000; and accounts payable $20,000 (for merchandise purchases only) . Budgeted sales follow:
$\begin{array} { l l } \text { January } & \$ 100,000 \\\text { February } & \$ 180,000 \\\text { March } & \$ 120,000 \\\text { April } & \$ 200,000\end{array}$ Other data:
-Sales are 40% cash, 50% collected during the following month, and 10% collected during the second month after sale. A 3% cash discount is given on cash sales
-Cost of goods sold is 40% of sales
-Ending inventory must be 150% of the next month's cost of sales
-Purchases are paid 70% in month of purchase and 30% in the following month
-The selling and administrative cost function is: $6,000 + $0.2 × sales. This includes $1,000 for depreciation
-All costs are paid in the month incurred
-Minimum cash balance requirement is $6,000
Cash receipts for April will be:

Question

Rainbow Legacy Ltd has the following balances at 31^st December 2019: Cash $46,000; accounts receivable $34,000 ($10,000 from November and $24,000 from December) ; merchandise inventory $40,000; and accounts payable $20,000 (for merchandise purchases only) . Budgeted sales follow:

\begin{array} { l l } \text { January } & \$ 100,000 \\\text { February } & \$ 180,000 \\\text { March } & \$ 120,000 \\\text { April } & \$ 200,000\end{array}

Other data:
-Sales are 40% cash, 50% collected during the following month, and 10% collected during the second month after sale. A 3% cash discount is given on cash sales
-Cost of goods sold is 40% of sales
-Ending inventory must be 150% of the next month's cost of sales
-Purchases are paid 70% in month of purchase and 30% in the following month
-The selling and administrative cost function is: $6,000 + $0.2 × sales. This includes $1,000 for depreciation
-All costs are paid in the month incurred
-Minimum cash balance requirement is $6,000
Cash receipts for April will be:

Quizplus · Accepted Answer

Cash receipts for April include 40% of April sales ($200,000 x 40% = $80,000), 50% of March sales ($120,000 x 50% = $60,000), and 10% of February sales ($180,000 x 10% = $18,000). Total = $80,000 + $60,000 + $18,000 = $158,000. However, a 3% discount is given on cash sales, so $80,000 x 3% = $2,400 discount. Therefore, $158,000 - $2,400 = $155,600.

Rainbow Legacy Ltd Has the Following Balances at 31st December

Rainbow Legacy Ltd Has the Following Balances at 31^st December