Question

Perez Pointers Corporation expects to begin operations on January 1, Year 1; it will operate as a specialty sales company that sells laser pointers over the Internet. Perez expects sales in January Year 1 to total $280,000 and to increase 15 percent per month in February and March. All sales are on account. Perez expects to collect 67 percent of accounts receivable in the month of sale, 22 percent in the month following the sale, and 11 percent in the second month following the sale. Required Prepare a sales budget for the first quarter of Year 1. Determine the amount of sales revenue Perez will report on the Year 1 first quarterly pro forma income statement. Prepare a cash receipts schedule for the first quarter of Year 1. Determine the amount of accounts receivable as of March 31, Year 1.

Answer 1

Perez Pointers Corporation

1. The amount of sales revenue that Perez will report on the Year 1 first quarterly pro forma income statement is:

= $280,000

2. Cash Receipts Schedule for the first quarter of Year 1:

January February March Quarter Total

Expected sales $280,000 $322,000 $370,300 $972,300

Cash Collection:

67% month of sale $187,600 $215,740 $248,101 $651,441

22% month following 61,600 70,840 132,440

11% second month 30,800 30,800

Total cash collection $187,600 $277,340 $349,741 $814,681

3. The amount of the Accounts Receivable balance as of March 31, Year 1

= $157,619.

Step-by-step explanation:

a) Data and Calculations:

January February March Quarter Total

Expected sales $280,000 $322,000 $370,300 $972,300

Cash Collection:

67% month of sale $187,600 $215,740 $248,101 $651,441

22% month following 61,600 70,840 132,440

11% second month 30,800 30,800

Total cash collection $187,600 $277,340 $349,741 $814,681

Accounts receivable balance as of March 31, Year 1 = $157,619