Answered: Ecology Company sells a biodegradable…

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

Ecology Company sells a biodegradable product called Run-All and has the following sales on account for the first four months of the current year:

Jan Feb March April

Sales in units: 2,000 2,000 3,000 4,000

The company is preparing a cash budget for April only. Based on past history accounts are collected 50% in the current month, 20% from the prior month, and 20% from 2 months back. Ten percent is considered uncollectible. How much cash will be collected in April?

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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