Question
James, Inc. makes a product that has peak sales in September of each year. The company...
James, Inc. makes a product that has peak sales in September of
each year. The company has prepared a sales budget for the third
quarter as shown below:
| Month | Budgeted Sales | ||
| July | $ | 200,000 | |
| August | 400,000 | ||
| September | 600,000 | ||
The company is in the process of preparing a cash budget for the
third quarter and must determine the expected cash collections by
month. To this end, the following information has been
assembled:
| Collections on Sales | |||
| In month of sale | 60 | % | |
| In month following sale | 25 | % | |
| In second month following sale | 15 | % | |
The company gives a 3% cash discount to customers paying in the
month of their sale. The company charges 2% interest to customers
who pay in the second month following their sales. The accounts
receivable balance to start the quarter is $150,000: $35,000 from
May's sales and $115,000 from June's sales.
Required:
Prepare a schedule of cash receipts for the third quarter.
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