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Q19SE

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Horngren'S Financial And Managerial Accounting
Found in: Page 1232

Short Answer

Using sensitivity analysis in budgeting

Refer to the Berry’s schedule of cash receipts from customers that you prepared in Short Exercise S22-9. Now assume that Berry’s sales are collected as follows:

60% in the month of the sale

20% in the month after the sale

18% two months after the sale

2% never collected

Prepare a revised schedule of cash receipts for January and February.

Answer

Total cash receipts from the customers is $572,440 in the month of January and $423,060 in the month of February.

See the step by step solution

Step by Step Solution

Step 1: Meaning of schedule of cash receipts

A systematic schedule created to record the money received from a customer is called a cash receipt schedule.

Step 2: Preparation of schedule of cash receipts

Particulars

January

February

Total budgeted sales

$702,000

$349,000

Cash receipts from customers:

60 % in the month of sale

$421,200

$209,400

20% in the month after sale

$407,000*20% =$81,400

$702,000*20% =$140,400

18% two months after sales

$388,000*18% =$69,840

$407,000*18% =$73,260

Total cash receipts from customers

$572,440

$423,060

Most popular questions for Business-studies Textbooks

Completing a comprehensive budgeting problem—merchandising company Alliance Printing Supply of Baltimore has applied for a loan. Its bank has requested a budgeted income statement for April 2018 and a balance sheet at April 30, 2018. The March 31, 2018, balance sheet follows:

As Alliance Printing Supply’s controller, you have assembled the following additional information:

a. April dividends of $7,000 were declared and paid.

b. April capital expenditures of $16,300 budgeted for cash purchase of equipment.

c. April depreciation expense, $1,000.

d. Cost of goods sold, 40% of sales.

e. Desired ending inventory for April is $22,400.

f. April selling and administrative expenses include salaries of $37,000, 30% of which will be paid in cash and the remainder paid next month.

g. Additional April selling and administrative expenses also include miscellaneous expenses of 10% of sales, all paid in April.

h. April budgeted sales, $89,000, 80% collected in April and 20% in May.

i. April cash payments of March 31 liabilities incurred for March purchases of inventory, $8,600.

j. April purchases of inventory, $8,600 for cash and $37,400 on account. Half the credit purchases will be paid in April and half in May.

Requirements

1. Prepare the sales budget for April.

2. Prepare the inventory, purchases, and cost of goods sold budget for April.

3. Prepare the selling and administrative expense budget for April.

4. Prepare the schedule of cash receipts from customers for April.

5. Prepare the schedule of cash payments for selling and administrative expenses for April.

6. Prepare the cash budget for April. Assume the company does not use short-term financing to maintain a minimum cash balance.

7. Prepare the budgeted income statement for April.

8. Prepare the budgeted balance sheet at April 30, 2018.

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