Question

The following is the sales budget for Tesoro Azul, Inc., for the first quarter of 2016:

  

January February March

Sales budget $142,000 $159,000 $174,000

  

Credit sales are collected as follows:

  

70 percent in the month of the sale

25 percent in the month after the sale

5 percent in the second month after the sale

  

The accounts receivable balance at the end of the previous quarter was $70,150 ($61,200 of which was uncollected December sales).

  

a. Compute the sales for November. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

  

Sales $

  

b. Compute the sales for December. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

  

Sales $

c. Compute the cash collections from sales for each month from January through March. (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.)

  

Cash Collection

January $

February $

March $

Answer 1

Answer a.

Uncollected accounts of $70,150 includes $61,200 of December sales and $8,950 of November sales

Uncollected November sales = 5% * November sales
$8,950 = 5% * November sales
November sales = $179,000

Answer b.

Uncollected December sales = 30% * December sales
$61,200 = 30% * December sales
December sales = $204,000

Answer c.

Cash collection in January = 70% * January sales + 25% * December sales + 5% * November sales
Cash collection in January = 70% * $142,000 + 25% * $204,000 + 5% * $179,000
Cash collection in January = $159,350

Cash collection in February = 70% * February sales + 25% * January sales + 5% * December sales
Cash collection in February = 70% * $159,000 + 25% * $142,000 + 5% * $204,000
Cash collection in February = $157,000

Cash collection in March = 70% * March sales + 25% * February sales + 5% * January sales
Cash collection in March = 70% * $174,000 + 25% * $159,000 + 5% * $142,000
Cash collection in March = $168,650