The sales budget for Perrier Inc. is forecasted as follows: To prepare a cash bu
ID: 2453747 • Letter: T
Question
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:
-- 50 percent in the month of sale
-- 25 percent in the month following sale.
-- 20 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 $24,000, of which $7,000 represents uncollected March sales and $17,000 represents uncollected April sales.
REQUIRED: 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 $120,000 June 160,000 July 180,000 August 120,000Explanation / 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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