Question

Based on the data presented in the Spreadsheet below (Cash Budget tab), calculate the cash receipts for the first quarter of this year.

Complete your calculations by filling in the highlighted cells. Discuss your observations about the way cash is collected if the company needs $150,000 per month for expenses.

Cookie Business
The budgeted credit sales are as follows:
December last year	$          250,000
January	$          125,000
February	$          300,000
March	$             90,000
Collection:
Month of the sale	80%
Month following the sale	20%
Estimated cash receipts
	January	February	March
Last month's sales
Current month's sales
Total

Answer 1

Answer:

Estimated cash receipts	January	February	March
Last month's sales	$   50,000	$   25,000	$   60,000
Current month's sales	$ 100,000	$ 240,000	$   72,000
Total	$ 150,000	$ 265,000	$ 132,000

Calculation:

Estimated cash receipts	January	February	March
Last month's sales	=250000*20%	=125000*20%	=300000*20%
Current month's sales	=125000*80%	=300000*80%	=90000*80%

Note:

January and February have a balance of $ 150,000 or more. So, there will be no shortage of cash.

But March cash collections are less than $ 150,000. So, there can be a cash deficiency in March of $ 18,000 (i.e. 150,000 less 132,000).

In case of any doubt or clarification, feel free to come back via comments.