Question

The following is the sales budget for Shleifer, Inc., for the first quarter of 2019: January February March Sales budget $ 202,000 $ 222,000 $ 245,000

Credit sales are collected as follows: 60 percent in the month of the sale. 30 percent in the month after the sale. 10 percent in the second month after the sale. The accounts receivable balance at the end of the previous quarter was $86,000 ($56,000 of which were uncollected December sales).

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

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

Answer a.

Accounts Receivable = Uncollected November Sales + Uncollected December Sales
$86,000 = Uncollected November Sales + $56,000
Uncollected November Sales = $30,000

Uncollected November Sales = 10% * November Sales
$30,000 = 10% * November Sales
November Sales = $300,000

Answer b.

Uncollected December Sales = 40% * December Sales
$56,000 = 40% * December Sales
December Sales = $140,000

Answer c.

January:

Cash Collection = 10% * November Sales + 30% * December Sales + 60% * January Sales
Cash Collection = 10% * $300,000 + 30% * $140,000 + 60% * $202,000
Cash Collection = $193,200

February:

Cash Collection = 10% * December Sales + 30% * January Sales + 60% * February Sales
Cash Collection = 10% * $140,000 + 30% * $202,000 + 60% * $222,000
Cash Collection = $207,800

March:

Cash Collection = 10% * January Sales + 30% * February Sales + 60% * March Sales
Cash Collection = 10% * $202,000 + 30% * $222,000 + 60% * $245,000
Cash Collection = $233,800