Reference no: EM131821169

Problem

Aztec Company sells its product for $200 per unit. Its actual and projected sales follow.

All sales are on credit. Recent experience shows that 24% of credit sales is collected in the month of the sale, 46% in the month after the sale, 24% in the second month after the sale, and 6% proves to be uncollectible. The product's purchase price is $110 per unit. All purchases are payable within 15 days. Thus, 60% of purchases made in a month is paid in that month and the other 40% is paid in the next month. The company has a policy to maintain an ending monthly inventory of 24% of the next month's unit sales plus a safety stock of 85 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,548,000 and are paid evenly throughout the year in cash. The company's minimum cash balance at month-end is $100,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $100,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 14% interest rate. On May 31, the loan balance is $44,000, and the company's cash balance is $100,000. (Round final answers to the nearest whole dollar.)

Required:

1. Prepare a table that shows the computation of cash collections of its credit sales (accounts receivable) in each of the months of June and July.