Building a Cash Budget
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Orion Corporation is preparing a cash budget for the six months beginning January 1. Shown below are the company's expected collection pattern and the budgeted sales for the period.
Expected collection pattern:
65% collected in the month of sale
20% collected in the month after sale
10% collected in the second month after sale
4% collected in the third month after sale
1% uncollectible
Budgeted sales:
January $160,000
February 185,000
March 190,000
April 170,000
May 200,000
June 180,000
The estimated total cash collections during April from sales and accounts receivables would be:
A) $155,900.
B) $167,000.
C) $171,666.
D) $173,400.
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Solution Summary
This solution discusses and illustrates how to build a cash budget for a single month if the cash collection and budgeted sales patterns are known for several months before it.
Solution Preview
Before starting the computations, determine the months involved in each category:
Expected collection pattern:
65% collected in the month of sale (April)
20% collected in the ...
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