RovniakReeds, a manufacturer of saxophone, oboe, and clarinet reeds, has projected sales to be $896,000 in October, $956,000 in November, $1,045,000 in December, and $928,000 in January. Rovniak's sales are 20% cash and 80% credit. The company's collection history indicates that credit sales are collected as follows: 25% in the month of the sale60% in the month after the sale12% two months after the sale3% are never collectedRequirement 1. Prepare a sales budget for all four months, showing the breakdown between cash and credit sales. Rovniak ReedsSales BudgetFor the Four Months Ended January OctoberNovemberDecemberJanuaryCash sales Credit sales Total sales Requirement 2. Prepare a cash collection budget for December and January. Round all answers up to the nearest dollar. Rovniak ReedsBudgeted Cash Collections from CustomersFor the Months of December and January DecemberJanuaryCash sales Collection of credit sales: 25% of current month credit sales 60% of prior month credit sales 12% of credit sales two months ago Total collection of credit sales Total cash collections

Cash sales = Total sales x 20% Creditsales = Total sales x 80%

Answered: Reeds, a manufacturer of saxophone,…

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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Rovniak

Reeds, a manufacturer of saxophone, oboe, and clarinet reeds, has projected sales to be $896,000 in October, $956,000 in November, $1,045,000 in December, and $928,000 in January. Rovniak's sales are 20% cash and 80% credit. The company's collection history indicates that credit sales are collected as follows:

25% in the month of the sale

60% in the month after the sale

12% two months after the sale

3% are never collected

Requirement 1. Prepare a sales budget for all four months, showing the breakdown between cash and credit sales.

Rovniak Reeds
Sales Budget
For the Four Months Ended January
	October	November	December	January
Cash sales
Credit sales
Total sales

Requirement 2. Prepare a cash collection budget for December and January. Round all answers up to the nearest dollar.

Rovniak Reeds
Budgeted Cash Collections from Customers
For the Months of December and January
	December	January
Cash sales
Collection of credit sales:
25% of current month credit sales
60% of prior month credit sales
12% of credit sales two months ago
Total collection of credit sales
Total cash collections

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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