The Ohio Company has the following historical pattern on its credit sales: 70% collected in the month of sale; 15% collected in the 1st month after the sale; 10% collected in the 2nd month after the sale; 4% collected in the 3rd month after the sale; and 1% uncollectible. The sales on open account have been budgeted for the last six months of 2021 as follows: July P60,000; August P70,000; September P80,000; October P90,000; November P100,000; and December P85.000. 1. How much is the total estimated collections from the budgeted sales of July, August and September? 2. How much is the total estimated collections for the 3rd quarter of the year? 3. How much is the estimated accounts receivable balance as of December 31?
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.
The Ohio Company has the following historical pattern on its credit sales: 70% collected in the month of sale; 15% collected in the 1st month after the sale; 10% collected in the 2nd month after the sale; 4% collected in the 3rd month after the sale; and 1% uncollectible. The sales on open account have been budgeted for the last six months of 2021 as follows: July P60,000; August P70,000; September P80,000; October P90,000; November P100,000; and December P85.000.
1. How much is the total estimated collections from the budgeted sales of July, August and September?
2. How much is the total estimated collections for the 3rd quarter of the year?
3. How much is the estimated accounts receivable balance as of December 31?
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