Preparing a financial budget- schedule of cash receipts, sensitivity analysis Ar
ID: 2419404 • Letter: P
Question
Preparing a financial budget- schedule of cash receipts, sensitivity analysis
Armand Company projects the following sales for the first three months of the year: $10,600 in january; $12,300 in February; and $12,900 in March. The company expects 60% of the sales to be cash and the remainder on account. Sales on account are collected 50% in the month of the sale and 50% in the following month. The Accounts Receivable account has a zero balance on January 1. Round to the nearest dollar.
Requirements
1. Prepare a schedule of cash receipts for Armand for January, February, and March. What is the balance in Accounts Receivable on March 31?
2. Prepare a revised schedule of cash receipts if receipts from sales on account are 60% in the month of the sale, 30% in the month following the sale, and 10% in the second month following the sale. What is the balance in Accounts Receivable on March 31?
Please show the step by step process. Thank you!
Explanation / Answer
1.
Prepare schedule of cash receipts For A on Jan, Feb and Mar is as follows:
2.
Prepare a revised schedule of cash receipts For A on Jan, Feb and Mar is as follows:
Month Total Sales Credit Sales(40% of total sales) Cash Collected from Debtors in: Jan Feb Mar Account Receivable On March 31 Jan $ 10,600 $ 4,240 $ 2,120 $ 2,120 $ - $ - Feb $ 12,300 $ 4,920 $ 2,460 $ 2,460 $ - Mar $ 12,900 $ 5,160 $ 2,580 $ 2,580 Total Cash Collected $2,120 $4,580 $ 5,040 $ 2,580 Cash sales
(60% of total sales) $ 6,360 $ 7,380 $ 7,740 Total cash receipts $ 8,480 $ 11,960 $ 12,780