Cash Receipts The sales budget for Perrier Inc. is forecasted as follows: ...
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Cash Receipts The sales budget for Perrier Inc. is forecasted as follows:
Month
Sales Revenue
May
$130,000
June
150,000
July
200,000
August
130,000
To prepare a cash budget, the company must determine the budgeted cash collections from sales. Historically, the following trend 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 2 percent cash discount for payments made by customers during the month of sale. The accounts receivable balance on April 30 is $22,000, of which $7,000 represents uncollected March sales and $15,000 represents uncollected April sales. (Hint: For collections of March and April receivables, start by determining total sales for the month. Assume the normal sales pattern.)
Prepare a schedule of budgeted cash collections from sales for May, June, and July. Include a three-month summary of estimated cash collections.
Perrier, Inc. Schedule of Budgeted Cash Collections Quarterly by Months
May
June
July
Total
Total Cash receipts:
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