Question

The sales budget for your company in the coming year is based on a quarterly growth rate of 10 percent with the first-quarter sales projection at $226.1 million. In addition to this basic trend, the seasonal adjustments for the four quarters are 0, -$17.1, -$9.1, and $22.1 million, respectively. Generally, 50 percent of the sales can be collected within the quarter and 40 percent in the following quarter; the rest of the sales are bad debt. The bad debts are written off in the second quarter after the sales are made. The beginning accounts receivable balance is $108.2 million. Assuming all sales are on credit, compute the cash collections from sales for each quarter. (Enter your answers in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Quarter 1 Quarter 2 Quarter 3 Quarter 4 Collected within quarter Collection from previous quarter Cash collections from sales

Answer 1

solution: Q1 02 Sales (basic trend) Seasonal Adjustment sales projection Q1 Q3 Q4 | 226,100,000 248,710,000 273,581,000 | 300,939,100 - 17,100,000 - 9,100,000 22,100,000 226,100,000 | 231,610,000 264,481,000 323,039,100 collected within quarter (50% of sales projection of current quarter) collection from previous quarter (40% of sales projection of Previous quarter)** Cash collection from sales Q1 113,050,000 | 86,560,000 199,610,000 Q2 Q3 115,805,000 132,240,500 90,440,000 | 92,644,000 206,245,000 224,884,500 Q4 161,519,550 105,792,400 267,311,950 **Q1=108.2*1000000*0.4/(1-0.5)

Q2 Part a: 01 02 03 04 01 (Next Year) Sales 900.00 980.00 940.00 1,040.00 990.00 Payments of accounts 294.00 282.00 312.00 297.00 Payments are made immediately hence 30% of next quarter sales will be payments on account. (900*1.10) Part b: Q1 Q2 Q3 Q4 Payments of accounts 270.00 294.00 282.00 312.00 Payment period is 90 days hence payment will be 30% of current quarter sales. Part c: | 01 02 03 04 Payments of accounts 278.00 290.00 292.00 307.00 Payment period is 60 days hence payment will be 1/3rd of 30% of next quarter sales and 2/3rd or 30% of current quarter sales.