Question

Estlin Corporation sells mail-order computers. In December 2018, it has generated $300,000 of sales revenue; the...

Estlin Corporation sells mail-order computers. In December 2018, it has generated $300,000 of sales revenue; the company expects a 20-percent increase in sales in January and 10 percent in February. All sales are on account. Estlin normally collects 80 percent of accounts receivable in the month of sale and 20 percent in the next month.

a. Prepare a sales budget for January and February 2019.
b. Determine the amount of sales revenue Estlin would report on the bimonthly pro forma income statement for January and February 2019.
c. Prepare a cash receipts schedule for January and February 2019.
d. Determine the amount of accounts receivable as of February 28, 2019.

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Answer #1

a) Sales budget

January February
Sales 300000*1.2 = 360000 360000*1.1 = 396000

b) Pro forma income statement

January February Total
Sales 300000*1.2 = 360000 360000*1.1 = 396000 756000

c) Cash receipt schedule

January February Total
December Sales 300000*20% = 60000 60000
January Sales 360000*80% = 288000 72000 360000
February sales 396000*80% = 316800 316800
Total Cash receipt 348000 388800 736800

d) Account receivable = 396000*20% = $79200

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