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?

Step by step solution

01

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

02

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

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