Exercise 21-18

Budgeting Systems for Management Accounting Warren / Reeve / Duchac Exercise 21-18 solution

Schedule of cash collections of accounts receivable
Pet Joy Wholesale Inc., a pet wholesale supplier, was organized on May 1, 2010. Projected sales for each of the first three months of operations are as follows:

The company expects to sell 10% of its merchandise for cash. Of sales on account, 50% are expected to be collected in the month of the sale, 35% in the month following the sale, and the remainder in the second month following the sale.

Prepare a schedule indicating cash collections from sales for May, June, and July.