Question

Sutton Pointers Corporation expects to begin operations on January 1, 2015; it will operate as a specialty sales company that sells laser pointers over the Internet. Sutton expects sales in January 2015 to total $300,000 and to increase 15 percent per month in February and March. All sales are on account. Sutton expects to collect 66 percent of accounts receivable in the month of sale, 23 percent in the month following the sale, and 11 percent in the second month following the sale.
Required:
a. Prepare a sales budget for the first quarter of 2015.
b. Determine the amount of sales revenue Sutton will report on the first 2015 quarterly pro forma income statement.
c. Prepare a cash receipts schedule for the first quarter of 2015. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.)
d. Determine the amount of accounts receivable as of March 31, 2015. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.)

Answer 1

Answer:

a. January=  $300,000, February = $345,000 and  March = $396,750

b.  $1,041,750

c. January=  $198,000, February = $296,700 and  March = $374,205

d. $22,545

Explanation:

Sales Budget [to determine sales revenue]

January                                =  $300,000

February ($300,000 × 1.15) = $345,000

March ($300,000 × 1.15^2)  = $396,750

Revenue for the quarter      = $1,041,750

Cash Receipts Schedule [to determine receipts and receivables balance]

                                     January        February           March

Sales                            $300,000     $345,000       $396,750

Receipt - 66%              ($198,000)    ($227,700)    ($261,855)

Receipt - 23 %                     -              ($69,000)      ($79,350)

Receipt - 11 %                       -                    -               ($33,000)

Total Receipts             ($198,000)   ($296,700)     ($374,205)

Account Receivable    $102,000       $48,300         $22,545