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 5,410,000 Quarter 3 4,890,000 Quarter 4 7,920,000 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 $5,160,000 and for the fourth quarter of the current year are $7,430,000. 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 "0". Shalimar CompanyCash Receipts BudgetFor the Coming Year Quarter 1 Quarter 2 Quarter 3 Quarter 4 Cash sales $_____ $_____ $_____ $______ Received on account from: Quarter 3, current year _______ Quarter 4, current year _______ _______ Quarter 1, next year _______ _______ Quarter 2, next year _______ _______ _______ Quarter 3, next year _______ _______ Quarter 4, next year _______ _______ _______ _______ 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 CompanyCash Receipts BudgetFor the Coming Year Quarter 1 Quarter 2 Quarter 3 Quarter 4 Cash sales $_______ $_______ $_______ $_______ Received on account from: Quarter 4, current year _______ Quarter 1, next year _______ _______ Quarter 2, next year _______ _______

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 5,410,000 Quarter 3 4,890,000 Quarter 4 7,920,000 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 $5,160,000 and for the fourth quarter of the current year are $7,430,000. 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 "0". Shalimar CompanyCash Receipts BudgetFor the Coming Year Quarter 1 Quarter 2 Quarter 3 Quarter 4 Cash sales $_ $_ $_ $ Received on account from: Quarter 3, current year _ Quarter 4, current year _ _ Quarter 1, next year _ _ Quarter 2, next year _ _ _ Quarter 3, next year _ _ Quarter 4, next year _ _ _ _ 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 CompanyCash Receipts BudgetFor the Coming Year Quarter 1 Quarter 2 Quarter 3 Quarter 4 Cash sales $_ $_ $_ $_ Received on account from: Quarter 4, current year _ Quarter 1, next year _ _ Quarter 2, next year _ ___

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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Question

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	5,410,000
Quarter 3	4,890,000
Quarter 4	7,920,000

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 $5,160,000 and for the fourth quarter of the current year are $7,430,000.

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 "0".

Shalimar CompanyCash Receipts BudgetFor the Coming Year

	Quarter 1	Quarter 2	Quarter 3	Quarter 4

Cash sales	$_____	$_____	$_____	$______
Received on account from:
Quarter 3, current year	_______
Quarter 4, current year	_______	_______
Quarter 1, next year	_______		_______
Quarter 2, next year		_______	_______	_______
Quarter 3, next year			_______	_______
Quarter 4, next year	_______	_______	_______	_______
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 CompanyCash Receipts BudgetFor the Coming Year

	Quarter 1	Quarter 2	Quarter 3	Quarter 4
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	$_______	$_______	$_______	$_______

Expert Solution

Step 1 Introduction

The cash budget is prepared to estimate the cash collection during the period. Credit sales are the sales for which cash has not been collected from the customers at the time of sales.

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