Cash Receipts The sales budget for Perrier Inc. is forecasted as follows: To pre
ID: 2546285 • 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 $29,000, of which $8,000 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 180,000 July 200,000 August 140,000Explanation / Answer
Calcualtion of Monthly Collection from Sales May-17 Jun-17 Jul-17 Aug-17 Sales $ 1,00,000.00 $ 1,80,000.00 $ 2,00,000.00 $ 1,40,000.00 60% in the month of Sales $ 60,000.00 $ 1,08,000.00 $ 1,20,000.00 $ 84,000.00 Less : Cash Discount 1% $ -600.00 $ -1,080.00 $ -1,200.00 $ -840.00 20 % in the month of Following Sale $ 20,000.00 $ 36,000.00 $ 40,000.00 15% in the second month following sale $ 15,000.00 $ 27,000.00 5% is uncollectable $ - $ - Total Cash Receipts $ 59,400.00 $ 1,26,920.00 $ 1,69,800.00 $ 1,50,160.00 Total Cash Receipts May-17 Jun-17 Jul-17 Total $ 59,400.00 $ 1,26,920.00 $ 1,69,800.00 $ 3,56,120.00
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