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Budgeted Cash Collections, Budgeted Cash Payments Historically, Ragman Company has had no significant bad debt experience with...

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Accounting

Budgeted Cash Collections, Budgeted Cash Payments

Historically, Ragman Company has had no significant bad debtexperience with its customers. Cash sales have accounted for 20percent of total sales, and payments for credit sales have beenreceived as follows:

40 percent of credit sales in the month of the sale
35 percent of credit sales in the first subsequent month
20 percent of credit sales in the second subsequent month
5 percent of credit sales in the third subsequent month

The forecast for both cash and credit sales is as follows.

January$185,000
February185,000
March193,000
April195,000
May220,000

Required:

1. What is the forecasted cash inflow forRagman Company for May?
$

2. Due to deteriorating economic conditions,Ragman Company has now decided that its cash forecast shouldinclude a bad debt adjustment of 2 percent of credit sales,beginning with sales for the month of April. Because of this policychange, what will happen to the total expected cash inflow relatedto sales made in April? (CMA adapted)

Cash will   by $.

Answer & Explanation Solved by verified expert
3.7 Ratings (558 Votes)
Particulars January February March April May Sales 18500000 18500000 19300000 19500000 22000000 Cash sales 20 a 3700000 3700000 3860000 3900000 4400000 Credit sales 80 14800000 14800000 15440000 15600000 17600000 Collection of credit sales for    See Answer
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