A company is preparing for a monthly sales budget for Jan, Feb, & Mar. Sales are 100% on credit. Credit sales for Jan, Feb, and Mar are $140, $180, and $160, respectively. Cash collections are made in - the month of sale: 50% - a month after sale: 30% - two month after sale: 15% - uncollectible: 5% (recognized in the month of sale) Q1. Total cash collection in March?
A company is preparing for a monthly sales budget for Jan, Feb, & Mar. Sales are 100% on credit. Credit sales for Jan, Feb, and Mar are $140, $180, and $160, respectively. Cash collections are made in - the month of sale: 50% - a month after sale: 30% - two month after sale: 15% - uncollectible: 5% (recognized in the month of sale) Q1. Total cash collection in March?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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
PRACTICE 1
•A company is preparing for a monthly sales budget for Jan, Feb, & Mar. Sales are 100% on credit. Credit sales for Jan, Feb, and Mar are $140, $180, and $160, respectively. Cash collections are made in
- the month of sale: 50%
- a month after sale: 30%
- two month after sale: 15%
- uncollectible: 5% (recognized in the month of sale)
Q1. Total cash collection in March?
Q2. If the budgeted EB of net A/R on 12/31 is $120 and the budgeted total cash collection in Feb is $162, how much is the total credit sales in November?
PRACTICE 2
•A company provides data regarding its operations as follows.
•Sales Budget (100% on credit):
November: $400,000, December: $375,000, January: $420,000
•Cash collection schedule:
Month of sale: 70%, Next Month: 27%, Uncollectible: $3%
•The cost of goods sold is 50% of sales.
•Monthly depreciation is $15,000.
•Other monthly expenses to be paid in cash are $25,000.
•60% of the RM purchase is paid for in the month of purchase, the remainder is paid in the following month.
•The company declared a special dividend of $10,000 on 11/5 to be paid on 12/15.
•Q. How much is the budgeted net income for November?
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