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Rosewood Guitar, Inc. is preparing it cash receipts schedule for the 1stquarter ending 20x1. In...

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Accounting

Rosewood Guitar, Inc. is preparing it cash receipts schedule for the 1stquarter ending 20x1. In doing so, its budget director prepared the following budgeted sales schedule:

Rosewood Guitar Company

Sales Budget

For the Quarter Ending March 31, 20x1

January

February

March

Budgeted sales

$185,000

$195,000

$225,000

Addition Information:

  • Sales for the prior November and December 200x0 were $150,000 and $165,000, respectively.
  • 55% of sales are for cash, the remaining 45% are credit sales.
    • Credit sales are collected as follows:
      • 15% in the month of sale
      • 65% in the month following the sale, and the remaining
      • 15% in the second month following the sale.
  • The company estimates that the remainder of credit sales will be uncollectible.

Required

  1. Prepare a cash receipts schedule for the first quarter of 20x1. (Please show your detailed schedule)
  2. What is the total amount of uncollected accounts receivable for the 3-month period, January, February and March?
  3. Briefly, provide the definition for the term budgetary slack. Why does, budgetary slack occur?
  4. What is the primary indication that budgetary slack is occurring?

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