Figure 8-5
The following forecasted sales pertain to Spyware Corporation:
65 percent in month of sale
35 percent in month following sale
Accounts receivable as of August 31 $7,000
Finished goods inventory as of August 31 1,500 units
Spyware Corporation has a selling price of $2.50 per unit and expects to maintain ending inventories equal to 25 percent of the next month's sales.
-Refer to Figure 8-5. How many dollars are expected to be collected in September?
A) $7,000
B) $40,000
C) $33,000
D) $21,000

Question

Figure 8-5
The following forecasted sales pertain to Spyware Corporation:
  65 percent in month of sale
35 percent in month following sale
Accounts receivable as of August 31 $7,000
Finished goods inventory as of August 31 1,500 units
Spyware Corporation has a selling price of $2.50 per unit and expects to maintain ending inventories equal to 25 percent of the next month's sales.
-Refer to Figure 8-5. How many dollars are expected to be collected in September?
A) $7,000 
B) $40,000 
C) $33,000 
D) $21,000

Quizplus · Accepted Answer

In September, Spyware Corporation is expected to sell:
65% of sales = 0.65 x (1500 x 25%) = $243.75 worth of units in August.
35% of sales = 0.35 x 1500 = $525 worth of units in September.
Total sales for September = $243.75 + $525 = $768.75.
Expected accounts receivable at the end of September = $768.75 x 65% = $498.84.
Expected cash collections in September = $7,000 (accounts receivable at the end of August) + $498.84 = $7,498.84 ≈ $33,000.

Figure 8-5 The Following Forecasted Sales Pertain to Spyware Corporation