The sales budget for Perrier Inc. is as forecasted as follows:
Month Sales Revenue
- May $120,000
- June 160,000
- July 180,000
- August 120,000
To prepare a cash budget, the company must determine the budgeted cash collections from sales. Historically, the following trend has been established regarding cash collection of sales:
- 60 percent in the month of sale
- 20 percent in the month following sale
- 15 percent in the second month following sale
- 5 percent uncollectible
The company gives a 2 percent cash discount for payments made by customers during the month if sale. The accounts receivable balance on April 30 is $24,000, of which $7,000 represents uncollected March sales and $17,000 represents uncollected April sales.
Prepare a schedule of budgeted cash collections from sales for May, June and July. Include a three month summary of estimated cash collections.