Bentham Company is developing its first-quarter monthly cash budget for 2000 and is having difficulty determining its expected cash collections.On investigation, the following actual and expected sales information was revealed : November $41,500 December $38,000 January $29,500 February $34,000 March $39,500 Tracing of collections from prior-year monthly sales and discussions with the credit manager helped develop a profile of collection behavior patterns. Of a given month's sales, 40 percent are typically collected in the month of sale. Because the company terms are 1 percent EOM (end of month), net 30, all collections within the month of sale are net of the 1 percent discount. Thirty percent of a given month's sales are collected in the month following the month of the sale. The remaining thirty percent are collected in the second month following the month of the sale.Bad debts are negligible and should be ignored. a) Prepare a schedule of cash collections for Bentham Company by month for January, February and March. b) Calculate the Accounts Receivable balance at March 31.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
(Cash collections) Bentham Company is developing its first-quarter monthly
November $41,500
December $38,000
January $29,500
February $34,000
March $39,500
Tracing of collections from prior-year monthly sales and discussions with the credit manager helped develop a profile of collection behavior patterns.
Of a given month's sales, 40 percent are typically collected in the month of sale. Because the company terms are 1 percent EOM (end of month), net 30, all collections within the month of sale are net of the 1 percent discount. Thirty percent of a given month's sales are collected in the month following the month of the sale. The remaining thirty percent are collected in the second month following the month of the sale.Bad debts are negligible and should be ignored.
a) Prepare a schedule of cash collections for Bentham Company by month for January, February and March.
b) Calculate the
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