1. Band Instruments Company has the following sales budget for the first three m

Question

1. Band Instruments Company has the following sales budget for the first three months of the current year:

Month Sales Revenue January $600,000 February 150,000 March 440,000

Historically, the following trend has been established regarding cash collection of sales:

• 65 percent in month of sale

• 25 percent in month following sale

• 8 percent in second month following sale

• 2 percent uncollectible

The company allows a 2 percent cash discount for payments made by customers during the month of the sale. November and December sales were $100,000 and $200,000, respectively.

Required: Prepare a schedule of budgeted cash collections from sales for January, February, and March.

Explanation / Answer

Budgted cash collections:

Collection of January February March Novemer sales 100000*8% =8000 December sales 200000*25%=50000 200000*8% =16000 January sales 600000*65% =390000 600000*25% =150000 600000*8% =48000 February sales 150000*65% = 97500 150000*25% =37500 March 440000*65% =286000 448000 263500 371500

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