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In: Accounting
Budgeted Cash Collections, Budgeted Cash Payments Historically, Ragman Company has had no significant bad debt experience...
Budgeted Cash Collections, Budgeted Cash Payments
Historically, Ragman Company has had no significant bad debt experience with its customers. Cash sales have accounted for 20 percent of total sales, and payments for credit sales have been received as follows:
40 percent of credit sales in the month of the sale
35 percent of credit sales in the first subsequent month
20 percent of credit sales in the second subsequent month
5 percent of credit sales in the third subsequent month
The forecast for both cash and credit sales is as follows.
| January | $185,000 |
| February | 185,000 |
| March | 193,000 |
| April | 195,000 |
| May | 220,000 |
Required:
1. What is the forecasted cash inflow for
Ragman Company for May?
$
2. Due to deteriorating economic conditions, Ragman Company has now decided that its cash forecast should include a bad debt adjustment of 2 percent of credit sales, beginning with sales for the month of April. Because of this policy change, what will happen to the total expected cash inflow related to sales made in April? (CMA adapted)
Cash will by $.
Solutions
Expert Solution
| Particulars | January | February | March | April | May | ||
| Sales | $ 185,000.00 | $ 185,000.00 | $ 193,000.00 | $ 195,000.00 | $ 220,000.00 | ||
| Cash sales (20%) | (a) | $ 37,000.00 | $ 37,000.00 | $ 38,600.00 | $ 39,000.00 | $ 44,000.00 | |
| Credit sales (80%) | $ 148,000.00 | $ 148,000.00 | $ 154,400.00 | $ 156,000.00 | $ 176,000.00 | ||
| Collection of credit sales for: | |||||||
| January | $ 59,200.00 | $ 51,800.00 | $ 29,600.00 | $ 7,400.00 | |||
| February | $ 59,200.00 | $ 51,800.00 | $ 29,600.00 | $ 7,400.00 | |||
| March | $ 61,760.00 | $ 54,040.00 | $ 30,880.00 | ||||
| April | $ 62,400.00 | $ 54,600.00 | |||||
| May | $ 70,400.00 | ||||||
| Credit collection | (b) | $ 59,200.00 | $ 111,000.00 | $ 143,160.00 | $ 153,440.00 | $ 163,280.00 | |
| Total collection | (a+b) | $ 96,200.00 | $ 148,000.00 | $ 181,760.00 | $ 192,440.00 | $ 207,280.00 | |
| 1) | Forecasted cash flow for May | $ 207,280.00 | |||||
| Particulars | January | February | March | April | May | |||
| Sales | $ 185,000.00 | $ 185,000.00 | $ 193,000.00 | $ 195,000.00 | $ 220,000.00 | |||
| Cash sales (20%) | (a) | $ 37,000.00 | $ 37,000.00 | $ 38,600.00 | $ 39,000.00 | $ 44,000.00 | ||
| Credit sales (80%) | $ 148,000.00 | $ 148,000.00 | $ 154,400.00 | $ 156,000.00 | $ 176,000.00 | |||
| Less: | Estimated Bad Debts (2%) | $ - | $ - | $ - | $ 3,120.00 | $ 3,520.00 | ||
| Estimated Good Debts | $ 148,000.00 | $ 148,000.00 | $ 154,400.00 | $ 152,880.00 | $ 172,480.00 | |||
| Collection of credit sales for: | ||||||||
| January | $ 59,200.00 | $ 51,800.00 | $ 29,600.00 | $ 7,400.00 | ||||
| February | $ 59,200.00 | $ 51,800.00 | $ 29,600.00 | $ 7,400.00 | ||||
| March | $ 61,760.00 | $ 54,040.00 | $ 30,880.00 | |||||
| April | $ 61,152.00 | $ 53,508.00 | ||||||
| May | $ 68,992.00 | |||||||
| Credit collection | (b) | $ 59,200.00 | $ 111,000.00 | $ 143,160.00 | $ 152,192.00 | $ 160,780.00 | ||
| Total collection | (a+b) | $ 96,200.00 | $ 148,000.00 | $ 181,760.00 | $ 191,192.00 | $ 204,780.00 | ||
| 2) | Cash will decrease by $ 2500 ($ 207280 - $ 204780) | |||||||
Hey, is this correct?
ekkarill92 answered 10 months agoRelated Solutions
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40 percent of credit sales in the month of the sale
35 percent of credit sales in the first subsequent month
20 percent of credit sales in the second subsequent month
5 percent of credit sales in the third subsequent month...
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40 percent of credit sales in the month of the sale
35 percent of credit sales in the first subsequent month
20 percent of credit sales in the second subsequent month
5 percent of credit sales in the third subsequent month...
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