Question

Pet Joy Wholesale Inc., a pet wholesale Supplier, was organized on May 1, 2010. Projected sales for each of the first three months of operations are as follows: May June July $360,000 450,000 600000 The company expects to sell 10% of its merchandise for cash. Of sales on account, 50% are expected to be collected in the month of the sale, 35% in the month following the sale, and the remainder in the second month following the sale. Prepare a schedule indicating cash collections from sales for May, June, and July.

Answer 1

To prepare the schedule indicating cash collections from sales for May, June, and July, we need to consider the expected collection percentages based on the given information. The cash collections from sales are $36,000, $225,000, and $217,500 for May, June, and July, respectively.

Step-by-step explanation:

To prepare the schedule indicating cash collections from sales for May, June, and July, we need to consider the expected collection percentages based on the given information.

For May:

Cash Collection = Sales in May x % of Cash Sales = $360,000 x 10% = $36,000

For June:

Cash Collection = (Sales in May x % of Sales on Account to be collected in the month of sale) + (Sales in June x % of Cash Sales)

= ($360,000 x 50%) + ($450,000 x 10%) = $180,000 + $45,000 = $225,000

For July:

Cash Collection = (Sales in June x % of Sales on Account to be collected in the month following the sale) + (Sales in July x % of Cash Sales)

= ($450,000 x 35%) + ($600,000 x 10%) = $157,500 + $60,000 = $217,500

Therefore, the cash collections from sales for May, June, and July are $36,000, $225,000, and $217,500, respectively.