ExercisesExercise 1 (Schedule of Expectęd Cash Collections)Peak sales for Mideast Products, Inc., occur in August. The company's salesbudget for the third quarter showing these peak sales is given below:JulyP600,000SeptemberP500,000TotalAugustP900,000Budgeted salesP2,000,000From past experience, the company has learned that 20% of a month's salesare collected in the month of sale, that another 70% is collected in the monthfollowing sale, and that the remaining 10% is collected in the second monthfollowing sale. Bad debts are negligible and can be ignored. May sales totaledP430,000 and June sales totaled P540,000.Required:1. Prepare a schedule of expected cash collections from sales, by month andin total, for the third quarter.2. Assume that the company will prepare a budgeted statement of financialposition as of September 30. Compute the accounts receivable as of thatdate.

Given: May June July Aug Sep Sales $430,000 $540,000 $600,000 $900,000 $500,000 Expected…

1. Prepare a schedule of expected cash collections from sales, by month and in total, for the third quarter. 2. Assume that the company will prepare a budgeted statement of financial position as of September 30. Compute the accounts receivable as of that date.

1. Prepare a schedule of expected cash collections from sales, by month and in total, for the third quarter. 2. Assume that the company will prepare a budgeted statement of financial position as of September 30. Compute the accounts receivable as of that date.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Cash budget

A cash budget is an estimate of an organization's cash flow for the future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future. If cash receipts are insufficient to cover future expenses, an organization may plan to obtain funds from other sources. After estimating the sales, purchase, and capital expenditure budgets for the year, management develops a cash budget. These budgets are created to ensure that an organization's cash flow is managed. It is important to note that only cash transactions are recorded when actual cash enters and exits an organization.

Question

Exercises
Exercise 1 (Schedule of Expectęd Cash Collections)
Peak sales for Mideast Products, Inc., occur in August. The company's sales
budget for the third quarter showing these peak sales is given below:
July
P600,000
September
P500,000
Total
August
P900,000
Budgeted sales
P2,000,000
From past experience, the company has learned that 20% of a month's sales
are collected in the month of sale, that another 70% is collected in the month
following sale, and that the remaining 10% is collected in the second month
following sale. Bad debts are negligible and can be ignored. May sales totaled
P430,000 and June sales totaled P540,000.
Required:
1. Prepare a schedule of expected cash collections from sales, by month and
in total, for the third quarter.
2. Assume that the company will prepare a budgeted statement of financial
position as of September 30. Compute the accounts receivable as of that
date.

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