Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen

Exercise 7

BUDGETED CASH COLLECTIONS, BUDGETED CASH PAYMENTS
Historically, Maplethorpe Company has had no significant bad debt experience with its customers. Cash sales have accounted for 10 percent of total sales, and payments for credit sales have been received as follows:
45 percent of credit sales in the month of the sale.
35 percent of credit sales in the first subsequent month.
16 percent of credit sales in the second subsequent month.
4 percent of credit sales in the third subsequent month.
The forecast for both cash and credit sales is as follows.

Required:
1. What is the forecasted cash inflow for Maplethorpe Company for May?
2. Due to deteriorating economic conditions, Maplethorpe 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)