Question

Cash Budget Aragon and Associates has found from past experience that 25% of its services are for cash. The remaining 75% are on credit. An aging schedule for accounts receivable reveals the following pattern: a. Ten percent of fees on credit are collected in the month that service is rendered. b. Sixty percent of fees on credit are collected in the month following service. C. Twenty-six percent of fees on credit are collected in the second month following service. d. Four percent of fees on credit are never collected. Fees (on credit) that have not been paid until the second month following performance of the legal service are considered overdue and are subject to a 3% late charge. Aragon has developed the following forecast of fees: May $180,000 June 200,000 190,000 July August 194,000 September 240,000 Required: Prepare a schedule of cash receipts for August and September. If an amount box does not require an entry, leave it blank or enter "O". Round answers to the nearest dollar.

Answer 1

Answer)

Aragon and Associates
Schedule of Cash Receipts
For August and September
Particulars	August	September
Cash Fees	$ 48,500	$ 60,000
Received from Sales in:
June	$ 40,170	-
July	$ 85,500	$ 38,162
August	$ 14,550	$ 87,300
September	-	$ 18,000
Total	$ 188,720	$ 203,462

Therefore, Total cash Collections during the month of August is $ 188,720 and that during the month of September is $ 203,462.

Working Note:

Sno	Particulars	May	June	July	August	September
A	Total Fees for service rendered	$ 180,000	$ 200,000	$ 190,000	$ 194,000	$ 240,000
B	Fees Collected in cash on the month in which service is rendered (25% of Service rendered in that particular month)    [ 25% of A]	$ 45,000	$ 50,000	$ 47,500	$ 48,500	$ 60,000
C	Services rendered on Credit    [75% of A]	$ 135,000	$ 150,000	$ 142,500	$ 145,500	$ 180,000
D	Cash Collections on account of 10% of fees on credit in month in which service is rendered   [10% of C]	$ 13,500	$ 15,000	$ 14,250	$ 14,550	$ 18,000
E	Fees Collected for services rendered on credit in immediately preceeding month (60% of services on credit in the immediately preceeding month)    [60% of C of Immediately month]	0	$ 81,000	$ 90,000	$ 85,500	$ 87,300
F	Fees Collected for services rendered on credit in one month preceeding immediately preceeding month (26% of services on credit of the month preceeding the immediately preceeding month)       [26% of C of the month preceeding the immediately preceeding month]	0	0	$ 35,100	$ 39,000	$ 37,050
G	3% late fees charged on the 26% of fees for services rendered in the month preceeding the immediately preceeding month            [3% of F]	0	0	$ 1,053	$ 1,170	$ 1,112
Total [B+ D + E + F]		$ 58,500	$ 146,000	$ 187,903	$ 188,720	$ 203,462

Calculation of Collections in the month of August on account of service on credit in various months:

Particulars	Amount
Received from Sales in:
June
(26% of services rendered on credit in the month of June) ($ 150,000 X 26%)	$ 39,000
(3% late fees on 26% of services rendered on credit in the month of June) ($ 39,000 X 3%)	$ 1,170
July
(60% of services rendered on credit in the month of July) ($ 142,500 X 60%)	$ 85,500
August
(10% of services rendered on credit in the month of August) ($ 145,500 X 10%)	$ 14,550
September	-
Total	$ 1,40,220

Calculation of Collections in the month of September on account of service on credit in various months:

Particulars	Amount
Received from Sales in:
June	-
July
(26% of services rendered on credit in the month of July) ($ 142,500 X 26%)	$ 37,050
(3% late fees on 26% of services rendered on credit in the month of July) ($ 37,050 X 3%)	$ 1,112
August
(60% of services rendered on credit in the month of August) ($ 145,500 X 60%)	$ 87,300
September
(10% of services rendered on credit in the month of September) ($ 180,000 X 10%)	$ 18,000
Total	$ 1,43,462