Question

Johnny Bard & Co. is developing its monthly cash budgets for the first quarter of 2010. The company has been in business since April 2008 and has experienced the following approximate cash flows: sales each month are 30 percent cash and 70 percent credit. Of the credit sales, 50 percent are paid for in the first month after the sale, 40 percent in the second month after sale, and 10 percent in the third month after sale. The company has almost no bad debts, and thus, these can be ignored. Total sales for the last three months of 2009 and expected total sales for the first three months of 2010 are as follows:
Required:
(a) Prepare a monthly schedule of cash collections for Johnny Bard & Co. for the first quarter of 2010.
(b) Calculate the expected Accounts Receivable balance at March 31, 2010.
(c) In early February 2010, the company realized that cash in flows from sales and collections for the previous month were only $725,000, which was significantly less than the budgeted amount. What explanation could be offered for this situation?


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  • CreatedMarch 27, 2015
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