Question

Cornerstone Exercise 8.11 (Algorithmic)
Cash Receipts Budget and Accounts Receivable Aging Schedule

Shalimar Company manufactures and sells industrial products. For next year, Shalimar has budgeted the following sales:

Quarter 1	$4,720,000
Quarter 2	6,030,000
Quarter 3	3,110,000
Quarter 4	8,450,000

In Shalimar’s experience, 10 percent of sales are paid in cash. Of the sales on account, 65 percent are collected in the quarter of sale, 25 percent are collected in the quarter following the sale, and 7 percent are collected in the second quarter after the sale. The remaining 3 percent are never collected. Total sales for the third quarter of the current year are $5,010,000 and for the fourth quarter of the current year are $7,210,000.

Required:

1. Calculate cash sales and credit sales expected in the last two quarters of the current year, and in each quarter of next year.

Quarter	Cash Sales	Credit Sales
3, current year	$501000	$4509000
4, current year	721000	6489000
1, next year	472000	4248000
2, next year	603000	5427000
3, next year	311000	2799000
4, next year	845000	7605000

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Hide 2. Construct a cash receipts budget for Shalimar Company for each quarter of the next year, showing the cash sales and the cash collections from credit sales. If an amount is zero, enter "0". Shalimar Company Cash Receipts Budget For the Coming Year Quarter 1 Quarter 2 Quarter 3 Quarter 4 Cash sales $   $   $   $   Received on account from: Quarter 3, current year 315630 Quarter 4, current year 1622250 Quarter 1, next year 2761200 Quarter 2, next year Quarter 3, next year Quarter 4, next year 0 0 0 Total cash receipts $   $   $   $

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Hide 3. What if the recession led Shalimar’s top management to assume that in the next year 10 percent of credit sales would never be collected? The expected payment percentages in the quarter of sale and the quarter after sale are assumed to be the same. How would that affect cash received in each quarter? Construct a revised cash budget using the new assumption. Shalimar Company Cash Receipts Budget For the Coming Year Quarter 1 Quarter 2 Quarter 3 Quarter 4 Cash sales $   $   $   $   Received on account from: Quarter 4, current year Quarter 1, next year Quarter 2, next year Quarter 3, next year Quarter 4, next year Total cash receipts $   $   $   $

Answer 1

Solution 1:

Ε G н + N 00 Quarter 3, Current year 4, Current year 1, next year 2, next year 3, next year 4, next year Cash Sales Credit Sales $501,000 $4,509,000 $721,000 $6,489,000 $472,000 $4,248,000 $603,000 $5,427,000 $311,000 $2,799,000 $845,000 $7,605,000 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 Sheet654 Sheet407 (3) Sheet656 Sheet36 (24) ) She

Solution 2 and 3:

3 7 9 10 Solution 2 Shalimar Company cash receipts budget For the coming Year Quarter 1 Quarter 2 Quarter 3 Quarter 4 Cash Sales $ 472,000 $603,000 $311,000 $845,000 Received on account from: (65%,25%,7%) Quarter 3, Current year $315,630 Quarter 4, Current year $1,622,250 $454,230 Quarter 1, next year $2,761,200 $1,062,000 $297,360 Quarter 2, next year $3,527,550 $1,356,750 $379,890 Quarter 3, next year $1,819,350 $699,750 Quarter 4, next year $4,943,250 11 12 13 14 Total Cash Receipts $5,171,080 $5,646,780 $3,784,460 $6,867,890| Solution 3 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 | Shalimar Company cash receipts budget For the coming Year Quarter 1 Quarter 2 Quarter 3 Quarter 4 $ 472,000 $603,000 $311,000 $845,000 Cash Sales Received on account from: (65%,25%) Quarter 4, Current year Quarter 1, next year Quarter 2, next year Quarter 3, next year Quarter 4, next year | $1,622,250 $2,761,200 | $1,062,000 $3,527,550 $1,356,750 $1,819,350 30 $699,750 $4,943,250 31 Total Cash Receipts $4,855,450 $5,192,550 $3,487,100 $6,488,000 32 33 34 35 36 37 43 44 46 48 49 50 51 Sheet654 Sheet407 (3) Sheet656 Sheet36 (24) ) She