Answered: cash receipts

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

Capital Budgeting

1. Knight Company has found that 30% of its sales are collected in the month of the sale
and the remainder of the sales are collected in the next month. If sales are expected to be
$100,000 in April, $120,000 in May, and $80,000 in June, what is the estimated amount
of cash receipts for May?
A. $114,000
B. $106,000
C. $92,000
D. $108,000

2. In recent years, Princess Company has collected 20% of its sales in the month of the sale
and the other 80% in the following month. During the first three months of 2002,
Princess is anticipating sales of $350,000; $403,000; and $389,000, respectively. What is
the amount of cash receipts budgeted for March?
A. $301,200
B. $360,600
C. $400,200
D. $391,800

Definition Definition Estimate of an organization's cash flow for a 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.

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