Cash Receipts The sales budget for Perrier Inc. is forecasted as follows: Month Sales Revenue May $140,000 June 140,000 July 180,000 August 120,000 To prepare a cash budget, the company must determine the budgeted cash collections from sales. Historically, the following trend has been established regarding cash collection of sales: • 60 percent in the month of sale. • 20 percent in the month following sale. • 15 percent in the second month following sale. • 5 percent uncollectible. The company gives a 1 percent cash discount for payments made by customers during the month of sale. The accounts receivable balance on April 30 is $25,000, of which $6,000 represents uncollected March sales and $19,000 represents uncollected April sales. (Hint: For collections of March and April receivables, start by determining total sales for the month. Assume the normal sales pattern.) Prepare a schedule of budgeted cash collections from sales for May, June, and July. Include a three-month summary of estimated cash collections. Perrier, Inc. Schedule of Budgeted Cash Collections Quarterly by Months May June July Total Total Cash receipts: $ 96,600 × $ 117,725 x $ 155,200 x $ 369,525 *

Cash Receipts The sales budget for Perrier Inc. is forecasted as follows: Month Sales Revenue May $140,000 June 140,000 July 180,000 August 120,000 To prepare a cash budget, the company must determine the budgeted cash collections from sales. Historically, the following trend has been established regarding cash collection of sales: • 60 percent in the month of sale. • 20 percent in the month following sale. • 15 percent in the second month following sale. • 5 percent uncollectible. The company gives a 1 percent cash discount for payments made by customers during the month of sale. The accounts receivable balance on April 30 is $25,000, of which $6,000 represents uncollected March sales and $19,000 represents uncollected April sales. (Hint: For collections of March and April receivables, start by determining total sales for the month. Assume the normal sales pattern.) Prepare a schedule of budgeted cash collections from sales for May, June, and July. Include a three-month summary of estimated cash collections. Perrier, Inc. Schedule of Budgeted Cash Collections Quarterly by Months May June July Total Total Cash receipts: $ 96,600 × $ 117,725 x $ 155,200 x $ 369,525 *

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

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.

Question

**Cash Receipts**

The sales budget for Perrier Inc. is forecasted as follows:

| Month | Sales Revenue |
|--------|---------------|
| May | $140,000 |
| June | $140,000 |
| July | $180,000 |
| August | $120,000 |

To prepare a cash budget, the company must determine the budgeted cash collections from sales. Historically, the following trend has been established regarding cash collection of sales:
- 60 percent in the month of sale.
- 20 percent in the month following sale.
- 15 percent in the second month following sale.
- 5 percent uncollectible.

The company gives a 1 percent cash discount for payments made by customers during the month of sale. The accounts receivable balance on April 30 is $25,000, of which $6,000 represents uncollected March sales and $19,000 represents uncollected April sales. (Hint: For collections of March and April receivables, start by determining total sales for the month. Assume the normal sales pattern.)

Prepare a schedule of budgeted cash collections from sales for May, June, and July. Include a three-month summary of estimated cash collections.

**Perrier, Inc. Schedule of Budgeted Cash Collections Quarterly by Months**

| | May | June | July | Total |
|--------|-----------|-----------|----------|-----------|
| Total Cash Receipts: | $96,600 | $117,725 | $155,200 | $369,525 |

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