Cash Receipts Budget and Accounts Receivable Aging Schedule Shalimar Company manufactures and sells industrial products. For next year, Shalimar has budgeted the following sales: Quarter 1 $4,690,000 Quarter 2 5.260.000 Quarter 3 3,600,000 Quarter 4 8,180,000 In Shalimar's experience, 10 percent of sales are paid in cash. Of the sales on account, 65 percent are collected in the quarter of sale, 25 percent are collected in the quarter following the sale, and 7 percent are collected in the second quarter after the sale. The remaining 3 percent are never collected. Total sales for the third quarter of the current year are $5,040,000 and for the fourth quarter of the current year are $6,910,000. Required: 1. Calculate cash sales and credit sales expected in the last two quarters of the current year, and in each quarter of next year.
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.
Shalimar Company manufactures and sells industrial products. For next year, Shalimar has budgeted the
following sales:
Quarter 1
$4,690,000
Quarter 2
5.260.000
Quarter 3
3,600,000
Quarter 4
8,180,000
In Shalimar's experience, 10 percent of sales are paid in cash. Of the sales on account, 65 percent are collected
in the quarter of sale, 25 percent are collected in the quarter following the sale, and 7 percent are collected in
the second quarter after the sale. The remaining 3 percent are never collected. Total sales for the third quarter
of the current year are $5,040,000 and for the fourth quarter of the current year are $6,910,000.
Required:
1. Calculate cash sales and credit sales expected in the last two quarters of the current year, and in each
quarter of next year.
Quarter
Cash Sales
Credit Sales
3, current year
4, current year
1, next year
2, next year
=
3, next year
4, next year
2. Construct a cash receipts budget for Shalimar Company for each quarter of the next year, showing the cash
sales and the cash collections from credit sales. If an amount is zero, enter "O".
Shalimar Company
Cash Receipts Budget
For the Coming Year
Quarter 1 Quarter 2 Quarter 3 Quarter 4
$
$
Cash sales
Received on account from:
Quarter 3, current year
Ouarter 4, current year
Quarter 1, next year
Quarter 2, next year
Quarter 3, next year
Ouarter 4, next vear
Total cash receipts
=
3. What if the recession led Shalimar's top management to assume that in the next year 10 percent of credit
sales would never be collected? The expected payment percentages in the quarter of sale and the quarter after
sale are assumed to be the same. How would that affect cash received in each quarter? Construct a revised
cash budget using the new assumption.
Shalimar Company
Cash Receipts Budget
For the Coming Year
Quarter 1 Quarter 2 Quarter 3 Quarter 4
$
-
E
Cash sales
Received on account from:
Quarter 4, current year
Quarter 1, next year
Quarter 2, next year
Quarter 3, next year
Quarter 4, next year
Total cash receipts
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