Cash Receipts The sales budget for Perrier Inc. is forecasted as follows: To pre
ID: 2340039 • Letter: C
Question
Cash Receipts
The sales budget for Perrier Inc. is forecasted as follows:
To prepare a cash budget, the company must determine the budgeted cash collections from sales. Historically, the following trend has been established regarding cash collection of sales:
60 percent in the month of sale.
20 percent in the month following sale.
15 percent in the second month following sale.
5 percent uncollectible.
The company gives a 1 percent cash discount for payments made by customers during the month of sale. The accounts receivable balance on April 30 is $23,000, of which $8,000 represents uncollected March sales and $15,000 represents uncollected April sales. Prepare a schedule of budgeted cash collections from sales for May, June, and July. Include a three-month summary of estimated cash collections.
Month Sales Revenue May $100,000 June 180,000 July 190,000 August 120,000Explanation / Answer
Solution:
First we calculate the sales uncollectible of March and april months,
Percentage of march sales uncollectible :
= 15 + 5 = 20%
March sales = $8,000 / 20% = $40,000
Percentage of April sales uncollectible:
= 20 + 15 + 5 = 40%
April sales = $15,000 / 40% = $37,500
Then, we prepare schedule of budgeted cash collections
Perrier, Inc.
Schedule of Budgeted Cash Collections
Quarterly by Months
($40,000 * 15%) =
$6,000
($37,500 * 20%) =
$7,500
($37,500 * 15) =
$5,625
($100,000 * 60%) * (1 - 1%) =
$59,400
($100,000 * 20%) =
$20,200
($100,000 * 15%) =
$15,000
($180,000 * 60%) * (1 - 1%)=
$106,920
($180,000 * 20%) =
$36,000
($190,000 * 60%) * (1 - 1%) =
$112,860
May June July Total March sales($40,000 * 15%) =
$6,000
April sales($37,500 * 20%) =
$7,500
($37,500 * 15) =
$5,625
May sales($100,000 * 60%) * (1 - 1%) =
$59,400
($100,000 * 20%) =
$20,200
($100,000 * 15%) =
$15,000
June sales($180,000 * 60%) * (1 - 1%)=
$106,920
($180,000 * 20%) =
$36,000
July sales($190,000 * 60%) * (1 - 1%) =
$112,860
Total cash receipts: $72,900 $132,545 $163,860 $369,305Related Questions
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