Cash Receipts The sales budget for Perrier Inc. is forecasted as follows: To pre

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 2 percent cash discount for payments made by customers during the month of sale. The accounts receivable balance on April 30 is $22,000, of which $7,000 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 $130,000 June 150,000 July 200,000 August 130,000

Explanation / Answer

Solution:

Schedule of expected cash collection - Perrior Inc. Particulars May June July Total Cash received for March Sale $5,250.00 $5,250.00 Cash received for April Sale $7,500.00 $5,625.00 $13,125.00 Cash received for May Sale $76,440.00 $26,000.00 $19,500.00 $19,500.00 Cash received for June Sale $88,200.00 $30,000.00 $30,000.00 Cash received for July Sale $117,600.00 $117,600.00 Budgeted Cash Collection $89,190.00 $119,825.00 $167,100.00 $376,115.00

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