Cash Receipts The sales budget for Perrier Inc. is forecasted as follows:
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 trends has been established regarding cash collection of sales:
60 percent in month of sales.
20 percent in month following sale.
15 percent in the second mont following sale.
5 percent uncollectible.
The company give 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. Included a three month summary of estimated cash collections.
Answer:
| May | June | July | Total | |
| Sales | 120,000 | 160,000 | 180,000 | 460,000 |
| 60%os current month sale | 72000 | 96000 | 108000 | 276,000 |
| Less: 2% discounts | 1440 | 1920 | 2160 | 5,520 |
| 20% of previous month sale | 8500 | 24000 | 32000 | 64,500 |
| 15% of second previous month sale | 5250 | 6375 | 18000 | 29,625 |
| 0 | ||||
| 84310 | 124455 | 155840 | 364,605 |
Working notes for the above answer
| April sales collection remaining=40% | |
| April sales=17000/40% | 42500 |
| 20% cash collection in May=42500*20% | 8500 |
| March Sales collection remaining =20% | |
| March sales=7000/20% | 35000 |
| 15% cash collection in =35000*15% | 5250 |
