James, Inc The Company Is in the Process of Preparing a Cash

question 49

Essay

James, Inc. makes a product that has peak sales in September of each year. The company has prepared a sales budget for the third quarter as shown below:
$\begin{array}{lc} \text { Month } &\text { Budgeted Sale. } \\\text { July } & \$ 200,000 \\\text { August } & 400,000 \\\text { September } & 600,000\end{array}$

The company is in the process of preparing a cash budget for the third quarter and must determine the expected cash collections by month. To this end, the following information has been assembled:
$\begin{array}{lr}& \text { Collections on Sales } \\\text { In month of sale } & 60 \% \\\text { In month following sale } & 25 \% \\\text { In second month following sale } & 15 \%\end{array}$
The company gives a 3% cash discount to customers paying in the month of their sale. The company charges 2% interest to customers who pay in the second month following their sales. The accounts receivable balance to start the quarter is $150,000: $35,000 from May's sales and $115,000 from June's sales.
Required:
Prepare a schedule of cash receipts for the third quarter.

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Definitions:

Useful Life

The estimated period over which an asset is expected to be usable by an organization, affecting its depreciation calculation.

Net Cash Inflow

The total amount of cash received minus the total amount of cash spent over a period.

Initial Investment

The initial amount of money spent to purchase an asset or start a project.

Annuities

Financial products that provide a series of payments over time, often used for retirement income.