Management estimates that 5% of credit sales are uncollectible. Of the credit sa

Question

Management estimates that 5% of credit sales are uncollectible. Of the credit sales that are collectible, 60% are collected in the month of sale and the remainder in the month following the sale. Purchases of inventory are equal to next month's budgeted cost of goods sold. The budgeted cost of goods sold are 70% of budgeted Sales. All purchases of inventory are on account; 25% are paid in the month of purchase, and the remainder is paid in the month following the purchase.

A) Budgeted cash collections in July from June credit sales are___________.

B) Budgeted total cash receipts in August are ­­­­­­­­­­­­_____________.  

C) Budgeted total cash payments in July for inventory purchases are______________.

Show all work. Answer all parts.

June(Actual) July (Budget) August (Budget) Cash Sales $          80,000 $        100,000 $                 60,000 Credit Sales $        240,000 $        360,000 $              180,000 Total Sales $        320,000 $        460,000 $              240,000

Explanation / Answer

A) BUDGETED CASH COLLECTIONS IN JULY FROM JUNE CREDIT SALES

UNCOLLECTIBLE CREDIT SALES = 5%

COLLECTIBLE CREDIT SALES = 95% I.E 240000*95%

=$228000

COLLECTIBLE AMOUNT IN THE MONTH FOLLOWING THE SALE = 40% OF TOTAL COLLECTIBLE AMOUNT

I.E 228000*40%

=$91200

B) BUDGETED TOTAL CASH RECEIPTS IN AUGUST

CASH RECEIPTS FROM JULY CREDIT SALES = 360000*95%*40% = 136800

CASH RECEIPTS FROM AUGUST CASH SALES = 60000

CASH RECEIPTS FROM AUGUST CREDIT SALES = 180000*95%*60% = 102600

TOTAL RECEIPTS =299400

C) BUDGETED TOTAL CASH PAYMENTS IN JULY FOR INVENTORY PURCHASES

CASH PAYMENT FOR JUNE INVENTORY PURCHASES = 322000*75% =$241500

CASH PAYMENT FOR JULY INVENTORU PURCHASES = 168000*25% =$42000

TOTAL CASH PAYMENT IN JULY = $283500

WORKINGS:-

COGS OF JULY = 70% 0F BUDGETED JULY SALES

= 460000*70% = 322000

PURCHASES OF JUNE = COGS OF JULY = 322000

COGS OF OF AUGUST = 70% OF BUDGETED SALES

= 240000*70%

=168000

PURCHASES OF JULY = COGS OF AUGUST

= $168000

  

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.