Question

Budget Prices Inc. opened for business on January 01, 2017 and has budgeted sales revenue for the first quarter of 2017 as follows: January $100,000 February $175,000 March $250,000 The company anticipates that approximately 80% of sales each month will be on credit given the nature of the business, with a collection plan as follows:  50% in the month of sale  40% in the month following the sale  10% two months following the sale Required: Prepare a monthly cash collections/receipts budget for the first quarter

Answer 1

cash Budget for First quarter of 2017
Particular	January	February	March
cash sale*	20,000 (100,000 x 20%)	35,000 (175,000 x 20%)	50,000 (250,000 x 20%)
Credit sale
1) 50% in the month of sale**	40,000 (80,000 x 50%)	70,000 (140,000 x 50%)	100,000 (200,000 x 50%)
2) 40% in the month following the sale***	---	32,000 (80,000 x 40%)	56,000 (140,000 x 40%)
3) 10% two months following the sale****	---	---	8,000 (80,000 x 10%)
total	60,000	137,000	214,000

Notes to above statement

* Credit sale is 80% of total sale so remaining 20% sale would be cash sale

** 50% amount of credit sale would receive in the month of sale

*** 40% amount of credit sale would receive in the month following the sale. For e.g. credit sale of January is 80,000 and its 30% amount would receive in February.

**** 10% amount of credit sale would receive after two month following the sale. For e.g. credit sale of January is 80,000 and its 10% amount would receive in March.