Question

The following is the sales budget for the given months of Hecto, Ltd.:

	Cash Sales	Credit Sales
May	$59,000	$283,000
June	$43,000	$236,000
July	$33,000	$205,000
August	$47,000	$268,000
September	$46,000	$197,000

Additional information to be used determining the expected cash collections each month that will be used in preparing the cash budget:

Collections on Credit sales:

• 50% in month of sale
• 20% in month following sale
• 30% in second month following sale

The Accounts Receivable balance on May 1 was $53,000. Of this amount, $41,000 represented uncollected April sales and $12,000 represented uncollected March sales. Part 1:

What is the expect cash to be collected in May? $_________?

Part 2:

The budgeted Accounts Receivable on September 1 would be:

A. $195,500

B. $202,900

C. $178,900

D. $224,900

E. $173,300

Answer 1

Part 1

Schedule of Expected Cash Collection for May
Cash sales for May	59,000
Cash collection for May credit sales (283,000 x 50%)	141,500
Cash collection for April credit sales (82,000 x 20%)	16,400
Cash collection for March credit sales	12,000
Total cash collection	$228,900

Total cash collection in May = $228,900

Part 2

Budgeted accounts receivable on September 1 = 30% of July credit sales + 50% of August credit sales

= 205,000 x 30% + 268,000 x 50%

= 61,500+134,000

= $195,500

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