Question

Preparing a financial budget—schedule of cash receipts, sensitivity analysis

Marcel Company projects the following sales for the first three months of the year: \(11,200 in January; \)12,300 in February; and $11,100 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 Marcel 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?

Short answer

Answer

Total cash receipts from the customers are $8,960 in the month of January, $12,080 in the month of February, and $11,340 in the month of March.

Step-by-step solution

Preparation of schedule of cash receipts

Particulars	January	February	March
Total budgeted sales	$11,200	$12,300	$11,100
Cash receipts from customers:
Cash sales (60%)	$6,720	$7,380	$6,660
Credit sales (40%) (50% in the month of sale)	$2,240	$2,460	$2,220
Credit sales (40%) (50% in the following month)	-	$2,240	$2,460
Total cash receipts from customers	$8,960	$12,080	$11,340
Account receivable on 31stMarch			$2,220

Preparation of revised schedule of cash receipts

Particulars	January	February	March
Total budgeted sales	$11,200	$12,300	$11,100
Cash receipts from customers:
Cash sales (60%)	$6,720	$7,380	$6,660
Credit sales (40%) (60% in the month of sale)	$2,688	$2,952	$2,664
Credit sales (40%) (30% in the following month)	-	$1,344	$1,476
Credit sales (40%) (10% in the second month following the sale)	-	-	$448
Total cash receipts from customers	$9,408	$6,324	$11,248
Account receivable on 31stMarch			$2,268