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 $225.4 million. In addition to this basic trend, the seasonal adjustments for the four quarters are 0, −$16.4, −$8.4, and $21.4 million, respectively. Generally, 40 percent of the sales can be collected within the quarter and 50 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 $104.4 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

As per the AR collection process, 40% are collected in the same quarter and 50% are collected in the next quarter and the remaining 10% is bad debt.
So the opening AR is 60% of the previous year's last quarter
Opening AR	$       104.40
Previous quarter's sale	104.40/60%	$       174.00
Collection in the first quarter	174*50%
Collection in first quarter	$         87.00
Now we will compute the sale
Description	Quarter-1	Quarter-2	Quarter-3	Quarter-4
Sale	$       225.40	$       247.94	$          272.73	$           300.01	with 10% increase over previous quarter
Quarterly adjustments	$                -	$        (16.40)	$             (8.40)	$              21.40
Sale	$       225.40	$       231.54	$          264.33	$           321.41
Collection-same quarter-40%	$         90.16	$          92.62	$          105.73	$           128.56
Collection from previous quarter-50%	$         87.00	$       112.70	$          115.77	$           132.17
Cash collection from sales	$       177.16	$       205.32	$          221.50	$           260.73