Question

Badlands, Inc. manufactures a household fan that sells for $20 per unit. All sales are on account, with 40 percent of sales collected in the month of sale and 60 percent collected in the following month. The data that follow were extracted from the company’s accounting records.

Badlands maintains a minimum cash balance of $35,000. Total payments in January 20x1 are budgeted at $210,000.

A schedule of cash collections for January and February of 20x1 revealed the following receipts for the period:

	Cash Receipts
	January			February
From December 31 accounts receivable	$	126,000
From January sales		92,000		$	145,000
From February sales					76,000

March 20x1 sales are expected to total 11,500 units.

Finished-goods inventories are maintained at 20 percent of the following month’s sales.

The December 31, 20x0, balance sheet revealed the following selected figures: cash, $24,100; accounts receivable, $126,000; and finished goods, $24,750.

Required:

Determine the number of units that Badlands sold in December 20x0.

Compute the sales revenue for March 20x1.

Compute the total sales revenue to be reported on Badlands’ budgeted income statement for the first quarter of 20x1.

Determine the accounts receivable balance to be reported on the March 31, 20x1, budgeted balance sheet.

Calculate the number of units in the December 31, 20x0, finished-goods inventory.

Calculate the number of units of finished goods to be manufactured in January 20x1.

Calculate the financing required in January, if any, to maintain the firm’s minimum cash balance.

Answer 1

Answer 1
The number of units that Badlands sold in December 20x0 = [Accounts receivables as on Dec.31,20x0 / 60%] / Selling price per unit
The number of units that Badlands sold in December 20x0 = [$126000/60%]/$20 per unit = 10500 units
Answer 2
The sales revenue for March 20x1 = Expected sales in units * selling price per unit
The sales revenue for March 20x1 = 11500 units * $20 per unit = $2,30,000
Answer 3
The total sales revenue to be reported on Badlands’ budgeted income statement for the first quarter of 20x1.
January	$237,000.00
February ($76000/40%)	$190,000.00
March	$230,000.00
Sales for First Quarter of 20x1	$657,000.00
Answer 4
The accounts receivable balance to be reported on the March 31, 20x1, budgeted balance sheet.
= March 20x1 Sales * 60% = $230000 * 60% = $1,38,000
Answer 5
The number of units in the December 31, 20x0, finished-goods inventory = 20% of following month's sales i.e.January month sales
The number of units in the December 31, 20x0, finished-goods inventory = 20% * [$237000/$20] = 2370 units
Answer 6
The number of units of finished goods to be manufactured in January 20x1.
	(in units)
Inventory as on 31/1/20x1 [20% of Feb sales i.e.9500 units]	1900
Add : Sales units for January [$237000/$20]	11850
Less : Inventory as on 1/1/20x1	2370
Units of finished goods to be manufactured in January 20x1.	11380
Answer 7
the financing required in January, if any, to maintain the firm’s minimum cash balance.
Cash balance as on 1/1/20x1	$24,100.00
Add : Cash receipts	$218,000.00
Less : Cash payment	$210,000.00
Cash balance as on 31/01/20x1	$32,100.00
Minimum Cash balance required	$35,000.00
Financing required in January [$35000 - $32100]	$2,900.00