Principles of Accounting Volume 2
19th Edition
ISBN: 9781947172609
Author: OpenStax
Publisher: OpenStax College
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Textbook Question
Chapter 7, Problem 11EB
Gear Up Co. pays 65% of its purchases in the month of purchase, 30% in the month after the purchase, and 5% in the second month following the purchase. What are the cash payments if it made the following purchases in 2018?
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The following information was extracted from ABC Ltd’s financial statements for the year ended 31 December 2019.
Sales on 30 November 2019 were K100 million and K110 million on 31 December 2019. For the year 2020, sales are expected to double at a constant monthly rate.
80% of the sales made are on account; the remainder on cash.
From past experience, 5% of the receivables have turned out to be irrecoverable.
Credit customers pay as follows:
75% in the month following the sale;
15% two months after the sale month.
Inventory levels are maintained at 20% of the following month’s sales.
Accounts payables are at settled at 30 days after purchase.
Required:
Prepare a collections schedule for the three-month period from January to March 2020.
The following information was extracted from ABC Ltd’s financial statements for the year ended 31 December 2019.
Sales on 30 November 2019 were K100 million and K110 million on 31 December 2019. For the year 2020, sales are expected to double at a constant monthly rate.
80% of the sales made are on account; the remainder on cash.
From past experience, 5% of the receivables have turned out to be irrecoverable.
Credit customers pay as follows:
75% in the month following the sale;
15% two months after the sale month.
Inventory levels are maintained at 20% of the following month’s sales.
Accounts payables are at settled at 30 days after purchase.
Required:
Prepare a cash forecast for the three-month period from January to March 2020.
You are presented with the following information extracted from your organisation’s financial statements for the year ended 31 December 2019.
Sales on 31 December 2019 were K110 million. For the year 2020, sales are expected to grow at 8% per month for the year.
90% of the sales made are on account; the remainder on cash.
Credit customers pay as follows:
85% in the month following the sale;
10% two months after the sale month.
Irrecoverable debts are expected at the historical norm of 5% of credit sales.
Inventory levels are maintained at 20% of the following month’s sales.
Accounts payables are at settled at 30 days after purchase.
QUESTION
Prepare a cash flow forecast for the three-month period from January to March 2020.
2. Calculate the following for each month of the forecast period:
Inventory days
Accounts receivable days
Accounts receivable days
Cash conversion cycle
Briefly explain the implication of your assessment in (2) above on the continued…
Chapter 7 Solutions
Principles of Accounting Volume 2
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Ch. 7 - Which of the following statements is not correct?...Ch. 7 - The units required in production each period are...Ch. 7 - The cash budget is part of which category of...Ch. 7 - Which is not a section of the cash budget? cash...Ch. 7 - Which budget is the starting point in preparing...Ch. 7 - Which of the following includes only financial...Ch. 7 - Which budget evaluates the results of operations...Ch. 7 - What is the main difference between static and...Ch. 7 - What is a budget and what are the different types...Ch. 7 - What is the difference between budgeting and...Ch. 7 - What are the advantages and disadvantages of the...Ch. 7 - Why might a rolling budget require more management...Ch. 7 - What information is necessary for the operating...Ch. 7 - What operating budget exists for manufacturing but...Ch. 7 - What is the process for developing a budgeted...Ch. 7 - Which of the financial budgets is the most...Ch. 7 - A company has prepared the operating budget and...Ch. 7 - Fill in the blanks: A flexible budget summarizes...Ch. 7 - What information is included in the capital asset...Ch. 7 - Why does budget planning typically begin with the...Ch. 7 - What steps should be considered it a budget is to...Ch. 7 - Blue Book printing is budgeting sales of 25,000...Ch. 7 - How many units are in beginning inventory it...Ch. 7 - Navigator sells GPS trackers for $50 each. 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