Question

Prepare a schedule of budgeted cash collections from sales for May, June, and July. Include a three-month summary of estimated cash collections.

Cash Receipts The sales budget for Andrew Inc. is forecasted as follows: Month Sales Revenue May $ 150,000 June 175,000 July 160,000 August 200,000 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% cash discount for payments made by customers during the month of sale. The accounts receivable balance on April 30 is $85,000, of which $25,000 represents uncollected March sales and $60,000 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. Andrew, Inc. Schedule of Budgeted Cash Collections Quarterly by Months May June July Total Cash receipts: $ 0 x $ 0 x $ Total 0 x $ 0 X

Answer 1

Solution :

	May	June	July	Total
Sales	150,000	175,000	160,000	485,000
60%os current month sale	90,000	105,000	96,000	291,000
Less: 2% discounts	1800	2100	1920	5,820
20% of previous month sale	30,000	30,000	35000	95,000
15% of second previous month sale	18,750	22,500	22500	63,750
	136,950	155,400	151580	443,930

Working notes for the above answer

April sales collection remaining=40%
April sales=60000/40%	150,000
20% cash collection in May=150,000*20%	30,000
March Sales collection remaining =20%
March sales=25,000/20%	125,000
15% cash collection in =125,000*15%	18,750

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