[perfura]

I have now idea on what to do with the 2% of interest charged mentioned below. I also don't know how to account for the accounts reaceivable not assumed to be paid in full at the beginning of the quarter. Please help me.

The sales budget for the third quarter of 2007, as shown below:

Sales
July $200,000
August $400,000
September $600,000

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:

In month of sale 60%
In month following sale 25%
In second month following sale 10%


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 Expected Collections for the third quarter of 2009.

[morgaine300]

Let's just use an example where $100,000 is the sales for this month.

$100,000 x 60% collected in month of sales = 60,000 - 3% discount = $58,200
So $58,200 is collected in this month.

$100,000 x 25% = $25,000 that will be collected next month.

$100,000 x 10% = $10,000 + 2% interest of $200 = $10,200
This gets collected in two months.

No, it doesn't all add back up to $100,000 but that's irrelevant because you're just looking at what happens to the cash.

I suggest taking each month's sales and working it forwards. That is, take July's sales, figure out how much is collected in July, then August, then September. Once that's finished, then move on to August's sales.

I'm not sure I understand what you're asking about the receivables.

[usman2009]

I understand your question for receivable .when we prepared collection budget than first we right account receivable than all months according percentages and we write amount of receivable same in quarterly .