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Sales on account for the first two months of the current yearare budgeted as follows: Jan. $ 560,000 Feb. 957,000 All sales aremade on terms of 2/10, n/30 (2% discount if paid in 10 days, fullamount by 30 days); collections on accounts receivable aretypically made as follows:
Collections within the month ofsale: | ||
Within discountperiod | 60 | % |
After discountperiod | 15 | |
Collections withinthe month following sale: | ||
Within discountperiod | 15 | |
After discountperiod | 7 | |
Returns, allowances,and uncollectibles | 3 | |
Total | 100 | % |
Cash Receipts
The sales budget for Perrier Inc. is forecasted as follows:
Month | Sales Revenue |
---|---|
May | $140,000 |
June | 140,000 |
July | 180,000 |
August | 120,000 |
To prepare a cash budget, the company must determine thebudgeted cash collections from sales. Historically, the followingtrend 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 bycustomers during the month of sale. The accounts receivable balanceon April 30 is $25,000, of which $6,000 represents uncollectedMarch sales and $19,000 represents uncollected April sales. Preparea schedule of budgeted cash collections from sales for May, June,and July. Include a three-month summary of estimated cashcollections.
Perrier, Inc. Schedule of Budgeted Cash Collections Quarterly by Months | ||||
---|---|---|---|---|
May | June | July | Total | |
Total Cash receipts: | $Answer | $Answer | $Answer | $Answer |
P8-23 - Please explain how you arrived at your answers.Thank you!
Problem 8-23 Schedule of Expected Cash Collections; Cash Budget[LO2, LO8]
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