In: Finance
Problem 16-10 Calculating Cash Collections [LO 3]
The following is the sales budget for Segura, Inc., for the first quarter of 2013: |
January |
February |
March |
|
Sales budget |
$138,000 |
$151,000 |
$163,000 |
Credit sales are collected as follows: |
65 percent in the month of the sale |
20 percent in the month after the sale |
15 percent in the second month after the sale |
The accounts receivable balance at the end of the previous quarter was $94,000 ($69,000 of which was uncollected December sales). |
Required: |
(a) |
Compute the sales for November. (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) |
Sales |
$ |
(b) |
Compute the sales for December. (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) |
Sales |
$ |
(c) |
Compute the cash collections from sales for each month from January through March. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) |
Cash Collection |
|
January |
$ |
February |
$ |
March |
$ |
References
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a.sales for november.
out of closing balance of accounts receivalble $69,000 belongs to december sales.
=> ($94,000 - $69,000) =>$25,000 belongs to november sales.
since (65%+ 20% =>85%) of november sales is collected in november and december
=>this $25,000 represents 15% of november sales
=> november sales = $25,000 /15%
=>$166,666.67..............(rounded to two decimals).
b.sales for december.
$69,000 is december sale uncollected.
=> 65% is collected in december
=>$69,000 represents (100% -65%=>35% of december sale)
=> december sale = $69,000/35% =>$197,142.86.
c.cash collection for each month from january to march.
cash collection | |
january [(15% * $166,666.67 november sale) + (20%*$197,142.86 december sale) + (65%*$138,000) january sale] | 154,128.57 |
february [(15%*$197,142.86 december sale) + (20%*$138,000 january sale) + (65%*$151,000 february sale)] | 155,321.43 |
march [(15%*$138,000 january sale) + (20%*$151,000 february sale) + (65%*163,000 march sale)] | 156,850 |