Question

Problem 18-10 Calculating Cash Collections

The following is the sales budget for Shleifer, Inc., for the first quarter of 2017:

	January			February			March
Sales budget	$	215,000		$	235,000		$	258,000

  

Credit sales are collected as follows:
  
55 percent in the month of the sale.
30 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 $99,000 ($69,000 of which was uncollected December sales).
  
a. Calculate the sales for November. (Do not round intermediate calculations and round your answer to the nearest whole dollar, e.g., 32.)
  
November sales           $
  
b. Calculate the sales for December. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
  
December sales           $
  
c. Calculate the cash collections from sales for each month from January through March. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
   

	Cash collections
January	$
February	$
March	$

Answer 1

It has been given that cash from credit sales are collected 55% in the same month, 30% in the next month and 15% in second next month.

Here, $99,000 has been the account receivable at the end of December, from which $69,000 has been for the December sales.

That means the rest of $30,000 must be receivable for the month of November, which should be 15% of the total credit sales for the month of November.

Thus, Total Credit Sales for the month of November would have been, $30,000/15%, that is $2,00,000.

Same way, $69,000 receivable for the month of December should be 45% of the total credit sales for the month of December.

Thus, Total Credit Sales for the month of December would have been, $69,000/45%, that is $1,53,333.33.

A. November Sales= $2,00,000

B. December Sales= $1,53,333.33

C. Total Collactions

Total Collections

Month	Calculation	Amount of Cash Collected
January	From the sale of November= $2,00,000*15% From the sale of December= $1,53,333.33*30% From the sale of January= $2,15,000*55% Total	$30,000 $46,000 $1,18,250 $1,94,250
February	From the sale of December= $1,53,333.33*15% From the sale of January= $2,15,000*30% From the sale of February= $2,35,000*55% Total	$23,000 $64,500 $1,29,250 $2,16,750
March	From the sale of January= $2,15,000*15% From the sale of February= $2,35,000*30% From the sale of March= $2,58,000*55% Total	$32,250 $70,500 $1,41,900 $2,44,650