To prepare a cash budget, the company must determine the budgeted cash collectio
ID: 2469598 • Letter: T
Question
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 $23,000, of which $8,000 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 $100,000 June 180,000 July 190,000 August 120,000Explanation / Answer
Month May June July August Sales 100000 180000 190000 120000 Receipts in month os sale (60%) 60000 108000 114000 72000 Receipts in first month following sale (20%) 20000 36000 38000 24000 Receipts in second month following sale (15%) 15000 27000 28500 18000 Uncollectible (5%) 5000 9000 9500 6000 Cash Budget May June July August Cash proceeeds from sale of cuurrent month 60000 108000 114000 72000 Add: Cash received form debtors of March 8000 Add: Cash received form debtors of April 7500 (15000)/40%*20% 5625 (15000)/40%*15% Add: Cash received form debtors of May 20000 15000 Add: Cash received form debtors of June 36000 27000 Add: Cash received form debtors of July 38000 Less: Cash discount in respect of receipts received in same month 600 1080 1140 720 Cash Flow during the month 74900 132545 163860 136280
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