Information pertaining to Sugarland\'s sales revenue is presented in the followi

Question

Information pertaining to Sugarland's sales revenue is presented in the following table:

Management estimates that 5% of credit sales are not collectible. Of the credit sales that are collectible, 60% are collected in the month of sale and the remainder in the month following the sale. Cost of purchases of inventory each month is 70% of the next month's projected total sales. All purchases of inventory are on account; 25% are paid in the month of purchase, and the remainder is paid in the month following the purchase.

Required:

1. Calculate Sugarland's budgeted total cash receipts in March.

2. Calculate Sugarland's budgeted total cash receipts in April.

3. Calculate Sugarland's budgeted total cash payments in February for inventory purchases.

4. Calculate Sugarland's budgeted total cash payments in March for inventory purchases.

February March April Cash sales $ 160,000 $ 150,000 $ 120,000 Credit sales 300,000 400,000 280,000 Total sales $ 460,000 $ 550,000 $ 400,000

Explanation / Answer

Working Notes:

Answers:

1. budgeted total cash receipts in March =$342000

2. budgeted total cash receipts in April.= $311600

3. budgeted total cash payments in February for inventory purchases = $166250

4.budgeted total cash payments in March for inventory purchases = $70000

February March April Credit sale $ 300,000 $ 400,000 $ 280,000 Not collectible (5%) $    15,000 $    20,000 $    14,000 Collectible $ 285,000 $ 380,000 $ 266,000 February sale collected in March $ 114,000 March Sale Collected in March $ 228,000 Mach Sale collected in April $ 152,000 April sale collected in April $ 159,600 Total collection $ 342,000 $ 311,600

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