Monette Corporation has found that 70% of its sales in any given month are credit sales, while the remainder are cash sales. Of the credit sales, Monette Corporation has experienced the following collection pattern. November sales for last year were $105,000, while December sales were $120,000 Projected sales for the next three months are as follows 20% received in the month of the sale 40% received in the month after the sale 24% received two months after the sale 16% of the credit sales are never received January sales February sales March sales $ 145,000 $ 125,000 S 195,000 Requirement Prepare a cash collections budget for the first quarter, with a column for each month and for the quarter. (Round your answers to the nearest whole dollar.) For the Months of January through March January Cash sales Collections on credit sales 20% Month of sale 40% Month after 24% Two months after Total cash collections

Question

Tammy

Business

31 August, 09:40

Monette Corporation has found that 70% of its sales in any given month are credit sales, while the remainder are cash sales. Of the credit sales, Monette Corporation has experienced the following collection pattern. November sales for last year were $105,000, while December sales were $120,000 Projected sales for the next three months are as follows 20% received in the month of the sale 40% received in the month after the sale 24% received two months after the sale 16% of the credit sales are never received January sales February sales March sales $ 145,000 $ 125,000 S 195,000 Requirement Prepare a cash collections budget for the first quarter, with a column for each month and for the quarter. (Round your answers to the nearest whole dollar.) For the Months of January through March January Cash sales Collections on credit sales 20% Month of sale 40% Month after 24% Two months after Total cash collections

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Ronald Kaiser · Answer 1

Answer and Explanation:

The preparation of cash collection budget is shown below:-

Cash Collection Budget

For the month of January through March

January February March Quarter

Cash sales $43,500 $37,500 $58,500 $139,500

Collection on Credit sales

20% month of sale $20,300 $17,500 $27,300 $65,100

40% month after $33,600 $40,600 $35,000 $109,200

24% two months after $17,640 $20,160 $24,360 $62,160

Total Cash collection $115,040 $115,760 $145,160 $375,960

Working Note 1

November December January February March

Total Sales $105,000 $120,000 $145,000 $125,000 $195,000

Cash sales $31,500 $36,000 $43,500 $37,500 $58,500

Credit sales $73,500 $84,000 $101,500 $87,500 $136,500

Credit sales is 70% of Total sales every month

Cash Sales is 30% of Total sales every month

Working Note 2

January February March Quarter

Cash sales $43,500 $37,500 $58,500 $139,500

Cash collection from credit sales of

November $17,640 $17,640

December $33,600 $20,160 $53,760

January $20,300 $40,600 $24,360 $85,260

February $17,500 $35,000 $52,500

March $27,300 $27,300

Total collections $115,040 $115,760 $145,160 $375,960