Question

Brady, Inc. is in the process of budgeting cash inflows for the next three months. Cash sales are 10 percent of total sales each month. Historically, sales on account have been collected as follows: 70 percent in the month of sale, 25 percent in the month after the sale, and the remaining 5 percent two months after the sale. Sales for the next three months are projected as follows: April, $192,000; May, $210,000; and June, $220,000. Accounts receivable on March 31 was $54,000.

1.) The expected total cash collections of Brady, Inc. in June are?

2.)What is the budgeted accounts receivable balance on June 30 for Brady, Inc.?

Answer 1

Working Notes: 1
		April	May	June	Total
	Sales	$           1,92,000	$         2,10,000	$         2,20,000	$           6,22,000
	Less: Cash Sales @ 10% (A)	$               19,200	$            21,000	$            22,000	$               62,200
	Net Credit Sales	$           1,72,800	$         1,89,000	$         1,98,000	$           5,59,800
	Expected Cash Collection is as below,
	70% of Sales in the month of Sale	$           1,20,960	$         1,32,300	$         1,38,600	$           3,91,860
	25% in the month following of Sale		$            43,200	$            47,250	$               90,450
	5% in the two month after the Sale			$               8,640	$                 8,640
	Total Cash collected on credit sales (B)	$           1,20,960	$         1,75,500	$         1,94,490	$           4,90,950
	Total Cash Collection (A+B)	$           1,40,160	$         1,96,500	$         2,16,490
SOLUTION:1
	BRADY , INC.,
	CALCULATION OF EXPECTED CASH COLLECTION FOR THE MONTH OF JUNE
	Particulars	June
	Cash Sales	$               22,000
	Cash Collected against Credit Sales
	70% of Sales in the month of Sale	$           1,38,600
	25% in the month following of Sale from May	$               47,250
	5% in the two month after the Sale from April	$                 8,640
	Total Expected Cash Collection in June	$           2,16,490
Answer = $ 216,490
SOLUTION:2
	CALCULATION OF BUDGETED ACCOUNT RECEIVABLE BALANCE AS ON JUNE
	Total Credit Sales From April to June	$           5,59,800
	Less: Total Cash Collected from Credit Sales (April to June)	$           4,90,950
	Balance is Account receivable for the month of June	$               68,850
Answer = $ 68,850