Problem - Cash Receipts
The sales budget for Perrier Inc. is forecasted as follows:
|
Month
|
Sales Revenue
|
|
May
|
$120,000
|
|
June
|
160,000
|
|
July
|
180,000
|
|
August
|
120,000
|
To prepare a cash budget, the company must determine the budgeted cash collection from sales. Historically, the following trend has been established regarding cash collection of sales:
- 60 percent of the month of sale
- 20 percent in the month following sale
- 15 per cent in the second month following sale
- 5 percent uncollectible
The company gives 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.
Prepare a schedule of budgeted cash collections from sales for May, June, and July. Include a three-month summary of estimated cash collections.