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Cornerstone Exercise 8.11 (Algorithmic) Cash Receipts Budget and Accounts Receivable Aging Schedule Shalimar Company manufactures and...
Cornerstone Exercise 8.11 (Algorithmic)
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 $4,670,000
Quarter 2 5,230,000
Quarter 3 2,850,000
Quarter 4 7,970,000
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 $5,000,000 and for the fourth quarter of the current year are $6,950,000.
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
Hide
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
$
$
$
$
Hide
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
$
$
$
$
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Previous Question 3 of 3001_Cornerstone Exercise 08.11 Algorithmic
Solutions
Expert Solution
| Working Note- | |||||||||
| As per the given information | |||||||||
| Current year ($) | Next Year ($) | ||||||||
| Quarter | 3rd | 4th | 1st | 2nd | 3rd | 4th | |||
| a | Sales | 5000000 | 6950000 | 4670000 | 5230000 | 2850000 | 7970000 | ||
| Expences Paid in cash (10% of sales ) | |||||||||
| b | Expences Paid in cash | 500000 | 695000 | 467000 | 523000 | 285000 | 797000 | ||
| c | 3% Bad Debt. | 150000 | 208500 | 140100 | 156900 | 85500 | 239100 | ||
| Collections | |||||||||
| 65% in Quarter of sale | |||||||||
| d | 65% of sales= | 3250000 | 4517500 | 3035500 | 3399500 | 1852500 | 5180500 | ||
| 25% in next quarter | |||||||||
| e | 25% of sales = | 1250000 | 1737500 | 1167500 | 1307500 | 712500 | |||
| 7% in second next quarter | |||||||||
| f | 7% of sales= | 350000 | 486500 | 326900 | 366100 | ||||
| Q-1 | CASH SALE & CREDIT SALE CALCULATION | ||||||||
| Current year ($) | Next Year ($) | ||||||||
| Quarter | 3rd | 4th | 1st | 2nd | 3rd | 4th | |||
| a | Sales | 5000000 | 6950000 | 4670000 | 5230000 | 2850000 | 7970000 | ||
| 65% in Quarter of sale | |||||||||
| b | 65% of sales= CASH SALE | 3250000 | 4517500 | 3035500 | 3399500 | 1852500 | 5180500 | ||
| c | Credit sales= | ||||||||
| (Sales- Cash Sale)=(a-b)= | 1750000 | 2432500 | 1634500 | 1830500 | 997500 | 2789500 | |||
| Note- Sale Collections in the same Quarter is called as Cash Sale and rest are called credit sales | |||||||||
| Q-2 | Shalimar Company | ||||||||
| Cash Receipts Budget | |||||||||
| Next Year ($) | |||||||||
| Receipts | 1st | 2nd | 3rd | 4th | |||||
| Current yr | 3rd quarter | 350000 | 0 | 0 | 0 | ||||
| Current yr | 4th quarter | 1737500 | 486500 | 0 | 0 | ||||
| Next Yr | 1st Quarter | 3035500 | 1167500 | 326900 | 0 | ||||
| Next Yr | 2nd Quarter | 0 | 3399500 | 1307500 | 366100 | ||||
| Next Yr | 3rd Quarter | 0 | 0 | 1852500 | 712500 | ||||
| Next Yr | 4th Quarter | 0 | 0 | 0 | 5180500 | ||||
| Total Receipt | 5123000 | 5053500 | 3486900 | 6259100 | |||||
| Q-3 | Shalimar Company | ||||||||
| Cash Receipts Budget | |||||||||
| Next Year ($) | |||||||||
| Receipts | 1st | 2nd | 3rd | 4th | |||||
| Current yr | 3rd quarter | 0 | 0 | 0 | 0 | ||||
| Current yr | 4th quarter | 1737500 | 0 | 0 | 0 | ||||
| Next Yr | 1st Quarter | 3035500 | 1167500 | 0 | 0 | ||||
| Next Yr | 2nd Quarter | 0 | 3399500 | 1307500 | 0 | ||||
| Next Yr | 3rd Quarter | 0 | 0 | 1852500 | 712500 | ||||
| Next Yr | 4th Quarter | 0 | 0 | 0 | 5180500 | ||||
| Total Receipt | 4773000 | 4567000 | 3160000 | 5893000 | |||||
| Note- Given that Because of recession the bad debt will be 10% . | |||||||||
| The collection of current quarter and next quarter will not get affected . | |||||||||
| Means , the second next quarter collection is not possible. | |||||||||
jeff jeffy answered 1 year agoRelated Solutions
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