Y Publishing is considering a change in its credit terms from n/30 to 2/10, n/30. The company's budgeted sales for the coming year are P 24,000,000 of which 80% are expected to be made on credit If the new credit terms are adopted, Y estimates that discounts would be taken on 50% of credit sales, however, uncollectible accounts would be unchanged. The new credit terms would result in expected discounts taken in the coming year of P .

Y Publishing is considering a change in its credit terms from n/30 to 2/10, n/30. The company's budgeted sales for the coming year are P 24,000,000 of which 80% are expected to be made on credit If the new credit terms are adopted, Y estimates that discounts would be taken on 50% of credit sales, however, uncollectible accounts would be unchanged. The new credit terms would result in expected discounts taken in the coming year of P .

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter15: Managing Short-term Assets

Section: Chapter Questions

Problem 12PROB

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A companys sales for the coming months are as follows: About 20 percent of sales are cash sales, and the remainder are credit sales. The company finds that typically 10 percent of a months credit sales are paid in the month of sale, 70 percent are paid the next month, and 15 percent are paid in the second month after sale. Expected cash receipts in July are budgeted at what amount? a. 114,520 b. 143,150 c. 145,720 d. 156,000
A companys controller is adjusting next years budget to reflect the impact of an expected 3 percent inflation rate. Listed below are selected items from next years budget before the adjustment. After adjusting for the 3 percent inflation rate, what is the companys total budget for the selected items before taxes for next year? a. 858,150 b. 860,412 c. 810,971 d. 858,971
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Shalimar Company manufactures and sells industrial products. For next year, Shalimar has budgeted the follow sales: In Shalimars 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 4,900,000 and for the fourth quarter of the current year are 6,850,000. 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. 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. 3. What if the recession led Shalimars 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.
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