Dakota Fan Inc manufactures an inexpensive household fan tha

Dakota Fan, Inc., manufactures an inexpensive household fan that it sells to retailers for $20 per unit. All sales are on account, with 35 percent of sales collected in the month of sale and 65 percent collected in the following month. The data that follow were extracted from the company’s accounting records.

Dakota Fan maintains a minimum cash balance of $28,000. Total payments in January 20x1 are budgeted at $195,000.

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

The December 31, 20x0, balance sheet revealed the following selected figures: cash, $22,900; accounts receivable, $117,000; and finished goods, $22,950.

Dakota Fan, Inc., manufactures an inexpensive household fan that it sells to retailers for $20 per unit. All sales are on account, with 35 percent of sales collected in the month of sale and 65 percent collected in the following month. The data that follow were extracted from the company’s accounting records.

Required: 1. Determine the number of units that Dakota Fan sold in December 20x0 December sales units 2. Compute the sales revenue for March 20x1 Sales revenue 3. Compute the total sales revenue to be reported on Dakota Fan\'s budgeted income statement for the first quarter of 20x1. Total sales revenue 4. Determine the accounts receivable balance to be reported on the March 31, 20x1, budgeted balance sheet. Accounts receivable balance

Solution

1) The collections on December sales will occur as follow: 35% in December; 65% in January $117,000 was collected in January from December sales; this represents 65% of December sales December sales = $117,000/65% $180,000.00 Units = $180,000/$20 9,000.00 Units 2) Expected March sales = 10,000 units x $20/unit $200,000.00 3) January sales ($80,000 + $121,000) $201,000.00 February sales ($66,500 ÷ 35%) $190,000.00 March sales $200,000.00 Total Sales Revenue $591,000.00 4) 65% of March sales will be collected in April Accounts receivable balance = $200,000 x 65% $130,000.00 5) Finished goods inventory = 20% of the following month’s sales January sales ($80,000 + $121,000) $201,000.00 Units = $201,000/$20 10,050.00 units December 31 finished goods inventory = 20% x 10050 2,010.00 Units 6) January 1 finished goods inventory 2,010.00 January 31 finished goods inventory = 20% x ($190,000 ÷ $20) $1,900.00 January Sales 10,050.00 Let X = # of finished goods to be manufactured in January Beginning Finished Goods + Finished Goods Manufacture - Goods Sold = Ending Finished Goods 2010 + x - 10050 = 1900 X = 9,940.00 Units 7) Cash balance, January 1 $22,900.00 Add: January receipts (80,000 + $121,000) $201,000.00 Deduct: January payment -$195,000.00 Cash balance, January 31 $28,900.00 Desired minimum balance -$28,000.00 Required financing $900.00