Figure 8-4 CD Productions needs to know its anticipated cash inflows for the next quarter by month.Cash sales are 10 percent of total sales each month.Historically, sales on account have been collected as follows: 60 percent in the month of sale, 30 percent in the month after the sale, and the remaining 10 percent two months after the sale.Sales for the quarter are projected as follows: April, $120,000; May, $100,000; and June, $80,000.Accounts receivable on March 31 were $60,000.
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Refer to Figure 8-4.CD Productions would expect to have an accounts receivable balance on June 30 of

Question

Quizplus · Accepted Answer

Accounts receivable on June 30 = $37,800.Sales for April = $120,000Cash sales for April = 10% of $120,000 = $12,000Credit sales for April = $120,000 - $12,000 = $108,000Collections from April sales in April = 60% of $108,000 = $64,800Collections from April sales in May = 30% of $108,000 = $32,400Collections from April sales in June = 10% of $108,000 = $10,800Sales for May = $100,000Cash sales for May = 10% of $100,000 = $10,000Credit sales for May = $100,000 - $10,000 = $90,000Collections from May sales in May = 60% of $90,000 = $54,000Collections from May sales in June = 30% of $90,000 = $27,000Sales for June = $80,000Cash sales for June = 10% of $80,000 = $8,000Credit sales for June = $80,000 - $8,000 = $72,000Collections from June sales in June = 60% of $72,000 = $43,200Accounts receivable on June 30 = Accounts receivable on March 31 + Collections from April sales in June + Collections from May sales in June + Collections from June sales in June - Credit sales for JuneAccounts receivable on June 30 = $60,000 + $10,800 + $27,000 + $43,200 - $72,000Accounts receivable on June 30 = $37,800

Figure 8-4 CD Productions Needs to Know Its Anticipated Cash