Question

The following is the sales budget for Profit, Inc., for the first quarter of 2018:

	January			February			March
Sales budget	$	213,000		$	233,000		$	256,000

Credit sales are collected as follows:

60 percent in the month of the sale

25 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 $97,000 ($67,000 of which was uncollected December sales).

a.	Calculate the sales for November. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b.	Calculate the sales for December. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
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.)

     

Answer 1

Solution

Here it is given that the sales of a month are collected in 3 months.

60 percent in the month of the sale

25 percent in the month after the sale

15 percent in the second month after the sale

A. receivables at the end of last quarter= 97000

Out of this December uncollected sales = 67000

Since in the second month after the month of sale 15% collection is done, therefore

November Sales= (Total receivable end of last quarter- the uncollected sales of December)/.15

=(97000-67000)/.15

=$ 200000

b. December uncollected sales= 67000

December sales collected in December = 60%

Therefore the uncollected sales of December = 100-60= 40%

Thus December sales= Sales uncollected in December/.4

= 67000/.4

=167500.00

c. Collection in a month =.60* Sales current month+ .25 *sales last month+ .15*sales done 2 months ago

Jan collection=.6*213000+.25*167500+.15*200000

=$199675.00

Feb collection=.60*233000+.25*213000+.15*167500

=$218175.0

March collection=.6*256000+.25*233000+.15*213000

=$243800

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