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: E Company has budgeted sales revenues of $170,000 for May, $215,000 for June, $240,000 for...

: E Company has budgeted sales revenues of $170,000 for May, $215,000 for June, $240,000 for July, and $160,000 for August. To prepare a cash budget, the company must determine the budgeted cash collections from sales. Generally the trend has been 55 percent collected in the month of sale, 25 percent collected in the month following sale, 18 percent collected in the second month following sale, and 2 percent uncollectible. Also, E Company grants a 2 percent cash discount to customers who pay in the month of sale (so they only collect 98 percent of the total amount for those sales instead of the usual 100 percent). Prepare a schedule of cash collections for the month of July only.

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Expert Solution

Month sales May June July Aug
May 170,000 (55%(Less2% Discount),25%,18%                                91,630                                42,500                                30,600
(170000 X 55%)*98% (170000 X 25%) (170000 X 18%)
June 215,000 (55%(Less2% Discount),25%,18%                              115,885                                53,750                                38,700
(215000 X 55%)*98% (215000 X 25%) (215000 X 18%)
July 240,000 (55%(Less2% Discount),25%                              129,360                                60,000
(240000 X 55%)*98% (240000 X 25%)
August 160,000 (55%(Less2% Discount)                                86,240
(160000 X 55%)*98%
                             213,710

ekkarill92 answered 1 year ago
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