76. CSO: 1A4b LOS: 1A4x
Tip-Top Cleaning Supply carries a large number of different items in its inventory, giving
the firm a competitive advantage in its industry. Below is part of Tip-Top’s budget for
the first quarter of next year.
Sales $855,000
Cost of goods sold 425,000
Rent and salary expenses 375,000
Historically, all of the sales are on account and are made evenly over the quarter. 5% of
all sales are determined to be uncollectible and written off. The balance of the
receivables is collected in 50 days. This sales and collection experience is expected to
continue in the first quarter. The projected balance sheet for the first day of the quarter
includes the following account balances.
Cash $ 10,000
Accounts receivable (net) 450,000
Inventory 900,000
Accounts payable 800,000
How much cash can Tip-Top anticipate collecting in the first quarter (based on a 360-day
year)?
a. $811,000.
b. $830,000.
c. $901,250.
d. $902,500.
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