Question

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

	January	February	March
Sales budget	$138,000	$155,000	$170,000

  
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 $68,750 ($60,000 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

	Sale of November is 175000
a)	1. the a/c receivable balance at the end of quarter is 68750 0f which 60000 is uncollected december sales
	hence uncollected november sales=68750-60000 =8750
	for sales in november : 70% is received in the month of sales
	25% in the month after the sales that is in december
	5% in second month after sales means receivable at the end of quarter
	hence total sales for novmember = 8750/5% = 175000
b)	sale of December is 200000
	uncollected december sales is 60000 which is 30%
	because 70% is received in the moth of december only so remaining 30% is receivable
	so, sales 60000/30% =200000
c)	cash collections for the month of january to march
					JANUARY		FEB		MARCH
	10 %Sales of nov				8750		0
	25%sales of december(25% 0f 200000)				50000		0
	5%sales of december(5% 0f 200000)				0		10000
	70% sales of January( 70% of 138000)				96600		0
	(25% 0f jan sales of 138000 in feb)				0		34500
	5%of jan sales of 138000 in march				0		0		6900
	FEBRURAY sales (70:25:5)				0		108500		38750
	MARCH sales (70:25:5)				0		0		119000
				TOTAL	155350		153000		164650