Question

Cash Receipts Budget and Accounts Receivable Aging Schedule

Shalimar Company manufactures and sells industrial products. For next year, Shalimar has budgeted the following sales:

Quarter 1	$4,610,000
Quarter 2	5,260,000
Quarter 3	6,510,000
Quarter 4	8,430,000

In Shalimar’s experience, 10 percent of sales are paid in cash. Of the sales on account, 65 percent are collected in the quarter of sale, 25 percent are collected in the quarter following the sale, and 7 percent are collected in the second quarter after the sale. The remaining 3 percent are never collected. Total sales for the third quarter of the current year are $5,740,000 and for the fourth quarter of the current year are $7,680,000.

Required:

1. Calculate cash sales and credit sales expected in the last two quarters of the current year, and in each quarter of next year.

Quarter	Cash Sales	Credit Sales
3, current year	$	$
4, current year
1, next year
2, next year
3, next year
4, next year

2. Construct a cash receipts budget for Shalimar Company for each quarter of the next year, showing the cash sales and the cash collections from credit sales. If an amount is zero, enter "0".

Shalimar Company
Cash Receipts Budget
For the Coming Year
	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Cash sales	$	$	$	$
Received on account from:
Quarter 3, current year
Quarter 4, current year
Quarter 1, next year
Quarter 2, next year
Quarter 3, next year
Quarter 4, next year
Total cash receipts	$	$	$	$

3. What if the recession led Shalimar’s top management to assume that in the next year 10 percent of credit sales would never be collected? The expected payment percentages in the quarter of sale and the quarter after sale are assumed to be the same. How would that affect cash received in each quarter? Construct a revised cash budget using the new assumption.

Shalimar Company
Cash Receipts Budget
For the Coming Year
	Quarter 1	Quarter 2	Quarter 3	Quarter 4
Cash sales	$	$	$	$
Received on account from:
Quarter 4, current year
Quarter 1, next year
Quarter 2, next year
Quarter 3, next year
Quarter 4, next year
Total cash receipts	$	$	$	$

Answer 1

Req 1.
Quarterr		Cash	Credit
3 Current year		574000	5166000
4 Current year		768000	6912000
1, Next year		461000	4149000
2, Next year		526000	4734000
3, Next yea		651000	5859000
4, Next year		843000	7587000
Req 2.
Cash Receipts budget
			Q1	Q2	Q3	Q4
Cash sales			461000	526000	651000	843000
Received on account:
Q3 Current year			361620
Q4 Current year			1728000	483840
Q1 Next year			2696850	1037250	290430
Q2 Next year				3077100	1183500	331380
Q3 Next Year					3808350	1464750
Q4 Next Year						4931550
Total Cash receipts			5247470	5124190	5933280	7570680
Rreq 3.
Cash Receipts Budget
			Q1	Q2	Q3	Q4
Cash sales			461000	526000	651000	843000
Received on account:
Q3 Current year
Q4 Current year			1728000
Q1 Next year			2696850	1037250
Q2 Next year				3077100	1183500
Q3 Next Year					3808350	1464750
Q4 Next Year						4931550
Total Cash receipts			4885850	4640350	5642850	7239300