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16. J. Lo’s Clothiers has forecast credit sales for the fourth quarter of the year as:
September (actual)
$70,000
Fourth Quarter
October
$60,000
November
55,000
December
80,000
Schedule of cash receipts (LO2)
Experience has shown that 30 percent of sales are collected in the month of sale, 60 percent in the following month, and 10 percent are never collected.
Prepare a schedule of cash receipts for J. Lo’s Clothiers covering the fourth quarter (October through December).
Solution:
J. Lo’s Clothiers
September
October
November
December
Credit sales
$70,000
$60,000
$55,000
$80,000
30% Collected in month of sales
18,000
16,500
24,000
60% Collected in month after sales
42,000
36,000
33,000
Total cash receipts
$60,000
$52,500
$57,000
19.
The Elliot Corporation has forecast the following sales for the first seven months of the year:
January
$12,000 May
$12,000
February
16,000
June
20,000
March
18,000
July
22,000
April
24,000
Schedule of cash payments (LO2)
Monthly material purchases are set equal to 20 percent of forecasted sales for the next month. Of the total material costs, 40 percent are paid in the month of purchase and 60 percent in the following month. Labor costs will run $6,000 per month, and fixed overhead is $3,000 per month. Interest payments on the debt will be $4,500 for both March and June. Finally, Elliot’s salesforce will receive a 3 percent commission on total sales for the first six months of the year, to be paid on June 30.
Prepare a monthly summary of cash payments for the six-month period from January through June. (Note: Compute prior December purchases to help get total material payments for January.)
Solution:
Elliot Corporation
Cash Payments Schedule Dec.
Jan.
Feb.
March
April
May
June
July
Sales $12,000
$16,000
$18,000
$24,000
$12,000
$20,000
$22,000
Purchases
(20% of next month’s sales)
2,400
3,200
3,600
4,800
2,400
4,000
4,400
Payment
(40% of current
September (actual)
$70,000
Fourth Quarter
October
$60,000
November
55,000
December
80,000
Schedule of cash receipts (LO2)
Experience has shown that 30 percent of sales are collected in the month of sale, 60 percent in the following month, and 10 percent are never collected.
Prepare a schedule of cash receipts for J. Lo’s Clothiers covering the fourth quarter (October through December).
Solution:
J. Lo’s Clothiers
September
October
November
December
Credit sales
$70,000
$60,000
$55,000
$80,000
30% Collected in month of sales
18,000
16,500
24,000
60% Collected in month after sales
42,000
36,000
33,000
Total cash receipts
$60,000
$52,500
$57,000
19.
The Elliot Corporation has forecast the following sales for the first seven months of the year:
January
$12,000 May
$12,000
February
16,000
June
20,000
March
18,000
July
22,000
April
24,000
Schedule of cash payments (LO2)
Monthly material purchases are set equal to 20 percent of forecasted sales for the next month. Of the total material costs, 40 percent are paid in the month of purchase and 60 percent in the following month. Labor costs will run $6,000 per month, and fixed overhead is $3,000 per month. Interest payments on the debt will be $4,500 for both March and June. Finally, Elliot’s salesforce will receive a 3 percent commission on total sales for the first six months of the year, to be paid on June 30.
Prepare a monthly summary of cash payments for the six-month period from January through June. (Note: Compute prior December purchases to help get total material payments for January.)
Solution:
Elliot Corporation
Cash Payments Schedule Dec.
Jan.
Feb.
March
April
May
June
July
Sales $12,000
$16,000
$18,000
$24,000
$12,000
$20,000
$22,000
Purchases
(20% of next month’s sales)
2,400
3,200
3,600
4,800
2,400
4,000
4,400
Payment
(40% of current