Twenty percent of the firm's services are for cash and the remaining 80% are on account. Of
Question:
Twenty percent of the firm's services are for cash and the remaining 80% are on account. Of the credit services, 40% are collected in the month that the service is provided, with the remaining 60% collected in the following month.
• Services provided in January are expected to total $250,000 and grow at the rate of 5% per month thereafter.
• January's cash collections are expected to be $240,400, and month-end receivables are forecast at $120,000.
• Monthly cash operating costs and depreciation during the first quarter of the year are approximated at $250,000 and $15,000, respectively.
• Sherman's December 31, 20x4 balance sheet revealed accounts payable balances of $28,000. This amount is related to the company's operating costs and is expected to grow to $36,000 by the end of 20x5's first quarter. All operating costs are paid within 30 days of incurrence.
• Company policy requires that a $20,000 minimum cash balance be maintained, and Sherman's 20x4 year-end balance sheet showed that the firm was in compliance with policy by having cash of $23,000.
Required:
A. Determine the sales revenue earned that will appear on the income statement for the quarter ended March 31, 20x5.
B. Compute the company's first-quarter cash collections.
C. Compute the cash balance that would appear on the March 31, 20x5 balance sheet.
Expert Answer:
A DETERMIN SALES REVENUE EARNED THAT WILL APPEAR ON THE INCOME STATEMENT FOR THE QUARTER ... View the full answer
