ash Receipts The sales budget for Perrier Inc. is forecasted as follows: To prep
ID: 2478846 • Letter: A
Question
ash 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 $27,000, of which $6,000 represents uncollected March sales and $21,000 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 170,000 July 180,000 August 120,000Explanation / Answer
May June July Total March month sales cash received 6,000/20*15 = 4,500 4,500 April month sales cash received 21,000/40*20 = 10,500 21000/40*15 = 7,875 18,375 May month sales cash received less discount 100,000*60% = 60,000-600 = 59,400 100,000*20% = 20,000 100,000*15% = 15,000 94,400 June month sales cash received less discount 170,000*60% = 102,000 - 1,020 = 100,980 170,000*20% = 34,000 1,34,980 July month sales cash received 180,000*60% = 108,000 - 1,080 = 106,920 1,06,920 Less: Disocunts 74,400 1,28,855 1,55,920
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