In: Accounting
Required:
Based on the above information, calculate the expected cash collection for the month of April
Sales Budget for the three months are given , i.e for february sales = $ 30,000 and for each next months $3000 of sales is increased.
i.e sales for March = $30,000 + 3000 = $33,000 and
sales for April = March month sale + $ 3000 = $ 33000 + 3000 = $ 36000.
The schedule of cash collection will be as follows:
February | march | April | |
Sales for the months | 30000 | 33000 | 36000 |
Cash Sales @60% | 18000 | 19800 | 21600 |
Credit sales @ 40% | 12000 | 13200 | 14400 |
Cash Collection schedule : | |||
Cash sales received in same month | 18000 | 19800 | 21600 |
Credit sales of the month received in same month @ 30% of credit sales | 3600 | 3960 | 4320 |
Credit sales of Previous month receipt in next month @70% | 0 | 8400 | 9240 |
( 12000 * 70%) | ( 13200 * 70%) | ||
Expected cash collection | 21600 | 32160 | 35160 |
Thus,
The expected cash collection for the month of April = $ 35,160.
In shortcut : Cash collection in April = 60% of 36000 as cash sales + 30% of $ 14,400 as credit sales receipt in same month + 70% of $ 13200 as credit sales of march month
i.e $ 21600 + $ 4320 + $ 9240 = $ 35,160