Historically, Ragman Company has had no significant bad debt experience with its customers.Cash sales have accounted for 20 percent of total sales, and payments for credit sales have beenreceived as follows:40 percent of credit sales in the month of the sale35 percent of credit sales in the first subsequent month20 percent of credit sales in the second subsequent month5 percent of credit sales in the third subsequent monthThe forecast for both cash and credit sales is as follows.January $185,000February 182,000March 192,000April 196,000May 210,000 Required:1. What is the forecasted cash inflow for Ragman Company for May?2. Due to deteriorating economic conditions, Ragman Company has now decided that its cashforecast should include a bad debt adjustment of 2 percent of credit sales, beginning withsales for the month of April. Because of this policy change, what will happen to the totalexpected cash inflow related to sales made in April? (CMA adapted)
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Historically, Ragman Company has had no significant
Cash sales have accounted for 20 percent of total sales, and payments for credit sales have been
received as follows:
40 percent of credit sales in the month of the sale
35 percent of credit sales in the first subsequent month
20 percent of credit sales in the second subsequent month
5 percent of credit sales in the third subsequent month
The
January $185,000
February 182,000
March 192,000
April 196,000
May 210,000
Required:
1. What is the forecasted
2. Due to deteriorating economic conditions, Ragman Company has now decided that its cash
forecast should include a bad debt adjustment of 2 percent of credit sales, beginning with
sales for the month of April. Because of this policy change, what will happen to the total
expected cash inflow related to sales made in April? (CMA adapted)
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