Question

The budgeted sales for Milton Machine, Inc. are shown below:

August............................$12,000

September......................$10,000

October..........................$20,000

November...................... $15,000

December.........................$9,000

From past experience, the company has collected 20% of the cash in the month of the sale, 50% in the month after the sale, and 30% two months after the sale occurred.

Prepare a schedule of expected cash collections from sales, by month and in total for the fourth quarter of the year.

Answer 1

Ans.	MILTON MACHINE, INC.
	Schedule of Expected Cash Collection
		October	November	December	Total
	Cash collected from :
	August sales	$3,600			$3,600
	September sales	$5,000	$3,000		$8,000
	October sales	$4,000	$10,000	$6,000	$20,000
	November sales		$3,000	$7,500	$10,500
	December sales			$1,800	$1,800
	Total cash collection	$12,600	$16,000	$15,300	$43,900
	Calculation of Cash collections:
		October	November	December
	August sales	$12,000 * 30%
	September sales	$10,000 * 50%	$10,000 * 30%
	October sales	$20,000 * 20%	$20,000 * 50%	$20,000 * 30%
	November sales		$15,000 * 20%	$15,000 * 50%
	December sales			$9,000 * 20%
	50% of December month's credit sales will be collected in January of next year and remaining 30% will be collected in
	the month of February in next year.