Question

Magna Corporation has prepared the following sales budget: Month Cash Sales Credit Sales Jan $16,000 $68,000 Feb 20,000 80,000 March 18,000 74,000 April 24,000 92,000 May 22,000 76,000 Collections are 40% in the month of sale, 45% in the month following the sale, and 10% two months following the sale. The remaining 5% is expected to be uncollectible. Required: Prepare a schedule of cash collections for March through May,

Answer 1

Schedule of Cash Collections for March through May:

	March	April	May
Credit sales	$74000	$92000	$76000
Cash collections
Cash sales	$18000	$24000	$22000
Collection of january credit sales(68000×10%)	$6800	-	-
Collection of february credit sales(80000×45%;80000×10%)	$36000	$8000	-
Collection of march credit sales(74000×40%;74000×45%;74000×10%)	$29600	$33300	$7400
Collection of April credit sales(92000×40%;92000×45%)	-	$36800	$41400
Collection of May Credit sales(76000×40%)	-	-	$30400
TOTAL CASH COLLECTIONS	$90400	$102100	$101200

*Cash has been collected as follows

- 40% of credit sales in the month of sale.

- 45% of credit sales in the following month of sale.

- 10% of credit sales after two months following the sale.

_____×_____

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