The director of budgeting for Mama\'s Inc. is beginning the process of preparing
ID: 2573242 • Letter: T
Question
The director of budgeting for Mama's Inc. is beginning the process of preparing a cash budget for each month of the coming year. The sales forecast for the month of January 2015 is as follows:
Estimated Cash Sales: $150,000
Estimated sales on account: $890,000
Historically, the accounts receivable from credit sales have been collected in the following pattern:
Month of sale: 20%
One month following sale: 40%
Two months after sale: 15%
Third month after sale: 15%
Uncollectible: 10%
Credit sales in the last 3 months of 2014, some of which remain uncollected at year-end, were as follows:
October 2014: $600,000
November 2014: $580,000
December 2014: $750,000
Compute the amount of cash expected to be collected from customers in January 2015.
Explanation / Answer
Amount of cash expected to be collected from customers in January 2015 :
Collection from accounts receivable from month of sale [20% * 890000] = $178000
October 2014 credit sale collection after 3 months [15% * $600000] = $90000
November 2014 credit sale collection after 2 months [15% * $580000] = $87000
December 2014 credit sale collection after 1 months[40% * $750000] = $300000
Total amount of cash expected to be collected from customers in January 2015 = $655000