Question

In: Accounting

In the coming year, Urayse, Inc. will be introducing its first product, a wrist brace that...

In the coming year, Urayse, Inc. will be introducing its first product, a wrist brace that protects serious video gamers from repetitive-motion injuries. The brace will be sold for $11.25 to retailers throughout the country. All sales will be made on account. An expected 65% of sales will be collected within the quarter of the sale, and another 30 % in the quarter following the sale. The remaining 5% of credit sales are expected to be uncollectible. The sales budget for the coming year is as follows

Budgeted sales units 1st Quarter: 25,000 2nd Quarter: 40,000 3rd Quarter:50,000 4th Quarter: 80,000

Prepare Urayse, Inc.'s, cash receipts budget for the coming year.   

Solutions

Expert Solution

To compute the cash receipt, Urayse Inc. will have to compute the total sales of a quarter. Usually, Company prepares a sales budget on monthly basis and quarterly basis. For Urayse, all the sales are made to retailers on credit initially and later on collected. For Urayse Inc., Sales budget will llook like below:

After Sales Budget, company its production and prepares cash flow statement accordingly. Since Urayse will receive 65% of its credit sales in same quarter in which sale is made and another 35% in next quarter. As per question, the rest 5% remains uncollectible which will be charged to P&L A/c as Bad debts. Point to note here is Sale made in Quarter 4 is realized as 65% in same quarter and 35% in Quarter 1 of next year. Let’s prepare the cash receipts Budget for Urayse:

ekkarill92 answered 1 year ago
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