ACCT 200 Lecture Notes - Lecture 12: Debits And Credits, Accounts Receivable, Income Statement

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mauvecricket694

13 Oct 2016

School

University of Arizona

Department

Accounting

Course

ACCT 200

Professor

Silverberg

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Document Summary

Receivables are important to companies because a large portion of sales in the u. s. are credit sales. Companies must pay close attention to receivables balance and manage them carefully. Receivables: amounts due from individuals and companies that are expected to be collected in cash. Represents one of a company"s most liquid assets. Expected to be collected in 30 to 60 days. Notes receivable: a written promise for amounts to be received. Normally require collection of interest and are 60 to 90 days or longer. Both accounts receivable and notes receivable are considered trade receivables. Interest receivable, loans to company officers, advances to employees, and income taxes refundable. Do not generally result from operations of the business. Classified and reported as separate items on balance sheet. A service organization records a receivable when it performs a service on account. Merchandiser records accounts receivable at the point of sale of merchandise on account.

Related Questions

Indicate whether the sentence or statement is true or false.

____ 5. The "list" sales price less any trade discount is the amount at which the receivable and the corresponding revenue should be recorded.

____ 6. When factoring accounts receivable without recourse, the buyer (factor) normally assumes the burden of billing and collecting accounts.

____ 7. Transferring receivables without recourse means that the bank or finance company advances cash in return for accounts receivable, but it retains the right to collect from the transferor if debtors fail to make payments when due.

____ 8. The transfer of accounts receivable with recourse should never be accounted for as a sale.

____ 9. Notes arising from loans to customers, officers, employees, and affiliated companies should be reported with the other regular trade notes receivable.

____ 10. An interest-bearing note is written as a promise to pay a face amount plus interest at a specified rate.

beigebat309

The controller of Dash Shoes Inc. instructs you to prepare amonthly cash budget for the next three months. You are presentedwith the following budgetinformation:

	March	April	May
Sales	$111,000	$135,000	$182,000
Manufacturing costs	47,000	58,000	66,000
Selling and administrative expenses	32,000	36,000	40,000
Capital expenditures	_	_	44,000

The company expects to sell about 12% of its merchandise forcash. Of sales on account, 60% are expected to be collected in themonth following the sale and the remainder the following month(second month following sale). Depreciation, insurance, andproperty tax expense represent $6,000 of the estimated monthlymanufacturing costs. The annual insurance premium is paid in July,and the annual property taxes are paid in November. Of theremainder of the manufacturing costs, 80% are expected to be paidin the month in which they are incurred and the balance in thefollowing month.

Current assets as of March 1 include cash of $42,000, marketablesecurities of $60,000, and accounts receivable of $132,600 ($97,000from February sales and $35,600 from January sales). Sales onaccount for January and February were $89,000 and $97,000,respectively. Current liabilities as of March 1 include a $56,000,12%, 90-day note payable due May 20 and $6,000 of accounts payableincurred in February for manufacturing costs. All selling andadministrative expenses are paid in cash in the period they areincurred. It is expected that $3,300 in dividends will be receivedin March. An estimated income tax payment of $16,000 will be madein April. Dash Shoes' regular quarterly dividend of $6,000 isexpected to be declared in April and paid in May. Managementdesires to maintain a minimum cash balance of $33,000.

Required:

1. Prepare a monthly cash budget and supportingschedules for March, April, and May. Input all amounts as positivevalues except overall cash decrease and deficiency which should beindicated with a minus sign. Assume 360 days per year for interestcalculations.

Dash ShoesInc.
CashBudget
For the ThreeMonths Ending May 31, 2016
	March	April	May
Estimated cash receipts from:
Cash sales	$	$	$
Collection of accounts receivable
Dividends
Total cash receipts	$	$	$
Estimated cash payments for:
Manufacturing costs	$	$	$
Selling and administrative expenses
Capital expenditures
Other purposes:
Note payable (including interest)
Income tax
Dividends
Total cash payments	$	$	$
Cash increase or (decrease)	$	$	$
Cash balance at beginning of month
Cash balance at end of month	$	$	$
Minimum cash balance
Excess or (deficiency)	$	$	$

skybee408

The controller of Dash Shoes Inc. instructs you to prepare amonthly cash budget for the next three months. You are presentedwith the following budget information:

	March	April	May
Sales	$94,000	$111,000	$149,000
Manufacturing costs	39,000	48,000	54,000
Selling and administrative expenses	27,000	30,000	33,000
Capital expenditures	_	_	36,000

The company expects to sell about 12% of its merchandise for cash.Of sales on account, 70% are expected to be collected in full inthe month following the sale and the remainder the following month.Depreciation, insurance, and property tax expense represent $7,000of the estimated monthly manufacturing costs. The annual insurancepremium is paid in July, and the annual property taxes are paid inNovember. Of the remainder of the manufacturing costs, 85% areexpected to be paid in the month in which they are incurred and thebalance in the following month.

Current assets as of March 1 include cash of $36,000, marketablesecurities of $51,000, and accounts receivable of $104,500 ($82,000from February sales and $22,500 from January sales). Sales onaccount for January and February were $75,000 and $82,000,respectively. Current liabilities as of March 1 include a $47,000,12%, 90-day note payable due May 20 and $7,000 of accounts payableincurred in February for manufacturing costs. All selling andadministrative expenses are paid in cash in the period they areincurred. It is expected that $2,800 in dividends will be receivedin March. An estimated income tax payment of $13,000 will be madein April. Dash Shoes' regular quarterly dividend of $7,000 isexpected to be declared in April and paid in May. Managementdesires to maintain a minimum cash balance of $28,000.

March April May

Estimated cashfrom:

Cash Sales

Collection of accounts receivable

Dividends

Total cash receipts

Estimated Cash payment for:

Manufacturing costs

selling and administrative expenses

Other purposes:

Note payable (including interest)

Income tax

dividends

Total cash payments

Cash increae or (decrease)

Cash balance at beginning of month

Minimum cash balance

Excess or (deficiency)

orchidyak459

ACCT 200 Lecture Notes - Lecture 12: Debits And Credits, Accounts Receivable, Income Statement

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