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Cash Receipts Budget and Accounts Receivable Aging Schedule Shalimar Company manufactures and sells industrial products. For...

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 $ $ $ $

Solutions

Expert Solution

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

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