The Guitar Shoppe reports the following sales forecast: August, $150,000; September, $170,000. Total sales includes 40% cash sales, 55% credit sales collected in the month following sale, and 5% credit sales written off as uncollectible. Prepare a schedule of cash receipts for September.

Question

Travis Barron

Business

7 May, 01:22

The Guitar Shoppe reports the following sales forecast: August, $150,000; September, $170,000. Total sales includes 40% cash sales, 55% credit sales collected in the month following sale, and 5% credit sales written off as uncollectible. Prepare a schedule of cash receipts for September.

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Valery Dennis · Answer 1

Cash Receipt Budget

Cash receipt budget shows the sales of cash and credit. It also shows the frequency of the payment of credit sales by the customer.

5% of noncollectable will not be recorded in the cash receipt. Calculate GS's scheduled cash receipts for the month of September as shown below:

GS Cash receipt Budget For September month

Sales = $170,000

Cash sales (0.4 * $170,000) = 68,000

Collections of prior month's Receivables ($150,000 x 0.55) = 82,500

Total cash receipts = $150,500

Working Notes

Cash sales are 40 percent of total sales.

55 percent of previous month receivables are received in the current month. As such, receivables pertaining to August is received in September.

Therefore, GS's budgeted cash receipts for the month of September is computed as $150,500