18BP Simpson Glove Company has made t... [FREE SOLUTION]

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Foundations Of Financial Management

Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen

Business Studies

16th Edition 路 768 pages

ISBN: 9781259277160

Chapter 2: 18BP (page 116)

Simpson Glove Company has made the following sales projections for the next six months. All sales are credit sales.
March
$41,000
April
50,000
May
32,000
June
47,000
July
58,000
August
62,000
Sales in January and February were $41,000 and $39,000, respectively. Experience has shown that of total sales receipts 10 percent are uncollectible, 40 percent are collected in the month of sale, 30 percent are collected in the following month, and 20 percent are collected two months after sale.
Prepare a monthly cash receipts schedule for the firm for March through
August.

Short Answer

Expert verified

Schedule of cash receipts

Months	Credit sales	In the month of sales @ 40% (A)	One month after sales @ 30% (B)	Two month after sales @ 20% (C )	Total cash receipts (A+B+C)
January	$41,000
February	39,000
March	41,000	16,400	11,700	8,200	36,300
April	50,000	20,000	12,300	7,800	40,100
May	32,000	12,800	15,000	8,200	36,000
June	47,000	18,800	9,600	10,000	38,400
July	58,000	23,200	14,100	6,400	43,700
August	62,000	24,800	17,400	9,400	51,600

Step by step solution

Cash receipt in the month of March

$\begin{array}{rcl} Cash receipt & = & (Sale of march 脳 40 %) + (Sale of february 脳 30 %) + (Sale of january 脳 20 %) \\ = & ($ 41, 000 脳 40 %) + ($ 39, 000 脳 30 %) + ($ 41, 000 脳 20 %) \\ = & $ 36, 300 \end{array}$

Cash receipt in the month of April

$\begin{array}{rcl} Cash receipt & = & (Sale of april 脳 40 %) + (Sale of march 脳 30 %) + (Sale of february 脳 20 %) \\ = & ($ 50, 000 脳 40 %) + ($ 41, 000 脳 30 %) + ($ 39, 000 脳 20 %) \\ = & $ 40, 100 \end{array}$

Cash receipt in the month of May

$\begin{array}{rcl} Cash receipt & = & (Sale of may 脳 40 %) + (Sale of april 脳 30 %) + (Sale of march 脳 20 %) \\ = & ($ 32, 000 脳 40 %) + ($ 50, 000 脳 30 %) + ($ 41, 000 脳 20 %) \\ = & $ 36, 000 \end{array}$

Cash receipt in the month of June

$\begin{array}{rcl} Cash receipt & = & (Sale of june 脳 40 %) + (Sale of may 脳 30 %) + (Sale of april 脳 20 %) \\ = & ($ 47, 000 脳 40 %) + ($ 32, 000 脳 30 %) + ($ 50, 000 脳 20 %) \\ = & $ 38, 400 \end{array}$

Cash receipt in the month of July

$\begin{array}{rcl} Cash receipt & = & (Sale of july 脳 40 %) + (Sale of june 脳 30 %) + (Sale of may 脳 20 %) \\ = & ($ 58, 000 脳 40 %) + ($ 47, 000 脳 30 %) + ($ 32, 000 脳 20 %) \\ = & $ 43, 700 \end{array}$

Cash receipt in the month of August

$\begin{array}{rcl} Cash receipt & = & (Sale of august 脳 40 %) + (Sale of july 脳 30 %) + (Sale of june 脳 20 %) \\ = & ($ 62, 000 脳 40 %) + ($ 58, 000 脳 30 %) + ($ 47, 000 脳 20 %) \\ = & $ 51, 600 \end{array}$

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	20X1	20X2
Sales	\(3,230,000	\)3,370,000
Cost of goods sold	2,130,000	2,850,000
Gross profits	\(1,100,000	\)520,000
Selling and administrative expenses	298,000	227,000
Operating profits	\(802,000	\)293,000
Interest expense	47,200	51,600
Income before taxes	\(754,800	\)241,400
Taxes (35%)	264,180	84,490
Income after tax	\(490,620	\)156,910

Current assets		Liabilities
Cash	\(15,000	Accounts payable	\)17,000
Accounts receivable	20,000	Notes payable	25,000
Inventory	30,000	Bonds payable	55,000
Prepaid expenses	12,500

Fixed assets		Stockholder鈥檚 equity
Plant and equipment (gross) Less: accumulated depreciation	\(255,000 51,000	Preferred stock	\)25,000
Net plant and equipment	\(204,000	Common stock	60,000
		Paid in capital	30,000
		Retained earnings	69,500
Total assets	\)281,500	Total liabilities and stockholder鈥檚 equity	\(281,500

Taxes	Earning per share
Share Outstanding	Earning before taxes
Interest Expense	Cost of goods sold
Depreciation Expense	Earning after taxes
Preferred Stcok dividends	Earning available to common stockholders
Sales	Selling and administrative expense
Gross profit

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Short Answer

Step by step solution

Cash receipt in the month of March

Cash receipt in the month of April

Cash receipt in the month of May

Cash receipt in the month of June

Cash receipt in the month of July

Cash receipt in the month of August

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March	\(41,000
April	50,000
May	32,000
June	47,000
July	58,000
August	62,000