10- $500,000 during the year? What effect would 2. What if operating income? On income before taxes? On net income? of 6 that have on Cash Receipts Budget and Accounts Receivable Aging Cornerstone Exercise 8.11 es OBJEC. Schedule CORN Shalimar Company manufactures and sells industrial products. For next year, Shalimar has bud- geted the follow sales: Quarter 1 Quarter 2 Quarter 3 st 5,000,000 Quarter 4 7,600,000 $4,600,000 5,100,000 (continued) PASS due in Dre exam will Chapter 8 Budgeting for Planning and Control In Shalimar's experience, 10 percent of sales are paid in cash. Of the sales on account, 65 per cent 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 $4,900,000 and for the never collected. Total sales for the third quarter of the current year are 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 Shalimar's top management to assume that in the next year 10 per- cent of credit sales would never be collected? The expected payment percentages in the quar- ter 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. Cornerstone Exercise & 1