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    Cash Collections

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    Peak sales for Midwest Products, Inc., occur in August. The company's sales budget for the third quarter showing these peak sales is given below:

    Budgeted sales............... July August September Total
    $600,000 $900,000 $500,000 $2,000,000

    From past experience, the company has learned that 20% of a month's sales are collected in the month of sale, that another 70% is collected in the month following sale, and that the remaining 10% is collected in the second month following sale. Bad debts are negligible and can be ignored. May sales totaled $530,000, and June sales totaled $540,000.

    1. Prepare a schedule of expected cash collections from sales, by month and in total, for the third quarter.

    May June July August September Total

    430,000 540,000 600,000 900,000 500,000 2,000,000

    86,000 378,000 60,000 180,000 499,930 1,203,930

    2. Assume that the company will prepare a budgeted balance sheet as of September 30. Compute the accounts receivable as of that date.

    796,070

    © BrainMass Inc. brainmass.com June 3, 2020, 6:44 pm ad1c9bdddf
    https://brainmass.com/business/cash-budgeting/cash-collections-72537

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    The solution explains the preparation of a schedule of expected cash collections and the ending accounts receivable

    $2.19

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