Cash Budget Capstone Publishers Inc collects 90 of its sales

Cash Budget Capstone Publishers Inc. collects 90% of its sales on account in the month of the sale and 10% in the month following the sale. If sales on account are budgeted to be $321,000 for April and $250,000 for May, what are the budgeted cash receipts from sales on account for May?

Solution

The budgeted cash receipt from sales on account for the month of May = $257,100

Cash receipt for April Sales [ $321000*10%] = $32,100

Cash receipt for May sales [$250,000*90%]= $225,000

Therefore, total cash collection in May = $32100 + 225000 = $257,100