The sales budget for Perrier Inc. is as forecasted as follows: Month Sales Reven
ID: 2350874 • Letter: T
Question
The sales budget for Perrier Inc. is as forecasted as follows:Month Sales Revenue
May $120,000
June 160,000
July 180,000
August 120,000
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 if sale. The accounts receivable balance on April 30 is $24,000, of which $7,000 represents uncollected March sales and $17,000 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.
Explanation / Answer
May
June
July
Cash from March sales
5250 (7000*.15/(.15+.05)
0
0
Cash from April sales
8500 (17,000*.2/(.2+.15+.05)
6375
(17,000*.15/(.2+.15+.05)
0
Cash from May sales
70,560 (120,000*.6*.98)
24,000
(120,000*.2)
18,000
(120,000*.15)
Cash from June sales
0
94,080
(160,000*.6*.98)
32,000
(160,000*.2)
Cash from July sales
0
0
105,840
(180,000*.6*.98)
Total
84,310
124,455
155,840
May
June
July
Cash from March sales
5250 (7000*.15/(.15+.05)
0
0
Cash from April sales
8500 (17,000*.2/(.2+.15+.05)
6375
(17,000*.15/(.2+.15+.05)
0
Cash from May sales
70,560 (120,000*.6*.98)
24,000
(120,000*.2)
18,000
(120,000*.15)
Cash from June sales
0
94,080
(160,000*.6*.98)
32,000
(160,000*.2)
Cash from July sales
0
0
105,840
(180,000*.6*.98)
Total
84,310
124,455
155,840
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