Question

Georgetown Corporation is preparing its master budget for the third quarter of 2006. The company's actual sales revenue for April, May, and June 2006 was $600,000, $750,000, and $820,000, respectively. The company's budgeted sales revenue for July, August, and September is $850,000,$760,000, and $800,000, respectively. Each month's sales are 40% cash sales and 60% sales on account. The company collects its accounts receivable in the following pattem: (1) 50% of the credit sales are collected in the month of the sale, (2) 35% of the month's credit sales are collected in the month after the month of sale, and (3) 15\% of the month's credit sales are collected in the second month after the month of sale. 1. Prepare the cash collections schedule for the Georgetown Corporation for the months of July August, and September 2006. The company does not anticipate receiving cash from any othe sources. 2. What is accounts receivable on September 30,2006?

Answer 1

The total cash collections for Georgetown Corporation for July, August, and September 2006 are $512,200, $632,800, and $726,500, respectively. The accounts receivable on September 30, 2006, is $644,100.

Step-by-step explanation:

To answer the question, we'll first calculate the cash collections for Georgetown Corporation for the months of July, August, and September based on the given percentages for cash sales and sales on account. Then, we'll compute the accounts receivable on September 30, 2006.

July:
Cash Sales: 40% of $850,000 = $340,000
Collections from June's Credit Sales (35%): 0.35 * 0.6 * $820,000 = $172,200
Total Collections for July: $340,000 + $172,200 = $512,200

August:
Cash Sales: 40% of $760,000 = $304,000
Collections from July's Credit Sales (50%): 0.5 * 0.6 * $850,000 = $255,000
Collections from June's Credit Sales (15%): 0.15 * 0.6 * $820,000 = $73,800
Total Collections for August: $304,000 + $255,000 + $73,800 = $632,800

September:
Cash Sales: 40% of $800,000 = $320,000
Collections from August's Credit Sales (50%): 0.5 * 0.6 * $760,000 = $228,000
Collections from July's Credit Sales (35%): 0.35 * 0.6 * $850,000 = $178,500
Total Collections for September: $320,000 + $228,000 + $178,500 = $726,500

To find the accounts receivable on September 30, 2006, we'll only focus on the amounts that have not yet been collected from credit sales in July, August, and September.
Accounts Receivable on September 30, 2006:
July (15%): 0.15 * 0.6 * $850,000 = $76,500
August (35%): 0.35 * 0.6 * $760,000 = $159,600
September (50% + 35%): 0.85 * 0.6 * $800,000 = $408,000
Total Accounts Receivable: $76,500 + $159,600 + $408,000 = $644,100

Answer 2

The cash collections schedule for July, August, and September amounts to $834,700, $784,300, and $796,100, respectively. Accounts receivable on September 30, 2006, is calculated to be $476,400, consisting of the remaining uncollected credit sales from August and September.

Step-by-step explanation:

Cash Collections Schedule

To prepare the cash collections schedule for Georgetown Corporation, we will calculate the cash and credit components of each month's sales and then apply the collection pattern for the credit sales. Since 40% of sales are cash, they are collected in the same month of the sale. We will use the given percentages to determine the collection of credit sales over the three month period.

July Cash Collections

Cash Sales (40% of $850,000): $340,000

Credit Sales (60% of $850,000): $510,000

July Credit Sales collected in July (50%): $255,000

June Credit Sales collected in July (35% of $492,000): $172,200

May Credit Sales collected in July (15% of $450,000): $67,500

Total July Collections = Cash Sales + Collections of Credit Sales = $340,000 + $255,000 + $172,200 + $67,500 = $834,700

August Cash Collections

Cash Sales (40% of $760,000): $304,000

Credit Sales (60% of $760,000): $456,000

August Credit Sales collected in August (50%): $228,000

July Credit Sales collected in August (35%): $178,500

June Credit Sales collected in August (15%): $73,800

Total August Collections = $304,000 + $228,000 + $178,500 + $73,800 = $784,300

September Cash Collections

Cash Sales (40% of $800,000): $320,000

Credit Sales (60% of $800,000): $480,000

September Credit Sales collected in September (50%): $240,000

August Credit Sales collected in September (35%): $159,600

July Credit Sales collected in September (15%): $76,500

Total September Collections = $320,000 + $240,000 + $159,600 + $76,500 = $796,100

Accounts Receivable as of September 30, 2006

Accounts receivable on September 30, 2006, includes the uncollected portions of credit sales from August and September since the July sales would be entirely collected by September.

August Credit Sales uncollected (15% of $456,000): $68,400

September Credit Sales uncollected in September (50% + 35% = 85% uncollected): $408,000

Total Accounts Receivable on September 30, 2006, = $68,400 + $408,000 = $476,400