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manonvsb manonvsb
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A month ago
Garden Gnomes Company produces various types of lawn ornaments. The company's sales budget for the first four months of the coming year is as follows. All sales are made on credit.

 March    April    May    June  
Budgeted sales$550,000$650,000$700,000$620,000

Garden Gnomes is planning to change its credit policies in the coming year. For the first time in its history, the company is offering a 2 percent discount to customers who pay within 15 days of the invoice date. Based on industry trends, Garden Gnomes estimates that this change will result in 60 percent of credit sales being paid within the discount period; another 20 percent of sales, within the month of sale (but outside of the discount period); and another 15 percent of sales, during the month after the sale. An estimated 5 percent of sales will be uncollectible.

Required:

a.Prepare Garden Gnomes' cash receipts budget for the second quarter of the coming
year.
Omit the heading.
b.How much cash will Garden Gnomes sacrifice in the second quarter by offering the
new discount?
c.What do you think led Garden Gnomes to offer the new discount to customers?
Textbook 
Managerial Accounting

Managerial Accounting


Edition: 4th
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JsimonJsimon
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A month ago
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b.April: $650,000  60%  2% =$  7,800
May: $700,000  60%  2% =8,400
June: $620,000  60%  2% =    7,440
​$23,640

c.Garden Gnomes may have offered the discount to customers because competitors
were doing the same thing, or it could be that the company needed to accelerate its cash flows to be able to pay its bills on time.
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manonvsb Author
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A month ago
Smart ... Thanks!
mcraver1
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Yesterday
Brilliant ツ
djeghri
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2 hours ago
Thanks
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