Question

The management team of Zachary Modems, Inc. (ZMI) wants to investigate the effect of several different growth rates on sales and cash receipts. Cash sales for the month of January are expected to be $200,000. Credit sales for January are expected to be $1,000,000. ZMI collects 100 percent of credit sales in the month following the month of sale. Assume a beginning balance in accounts receivable of $960,000.

Required

Calculate the amount of sales and cash receipts for the months of February and March assuming a growth rate of 2 percent and 4 percent. The results at a growth rate of 1 percent are shown as an example.

  

Sales Budget
	Jan				Feb				Mar
Cash sales	$	200,000			$	202,000			$	204,020
Sales on account		1,000,000				1,010,000				1,020,100
Total budgeted sales	$	1,200,000			$	1,212,000			$	1,224,120
Schedule of Cash Receipts
Current cash sales	$	200,000			$	202,000			$	204,020
Plus collections from accounts receivable		960,000				1,000,000				1,010,000
Total budgeted collections	$	1,160,000			$	1,202,000			$	1,214,020

Answer 1