Jackon, Inc. has the following sales budget for next year. Jackson has a gross m

Question

Jackon, Inc. has the following sales budget for next year. Jackson has a gross margin % of 18% and sells everything on credit. Accounts are expected to be collected as follows: 55% in the quarter of the sales; 25% in the quarter following the sale; 20% in the second quarter following the sale.

A. What is budgeted cost of goods sold for Quarter 2?

B. What is accounts receivable on the balance sheet at the end of Quarter 4?

Explanation / Answer

a). Jaksong Inc. has gross margin of 18%.
Sales for Quarter 2 = $85000
Budgeted cost of goods sold = Sales - Gross margin = 100% - 18% = 82%
= $85000 *82% = $69,700

b). Calculation of account receivable at the end of Quarter 4:
Payments of Quarter 1 and 2 are going to fully received till Quarter 4, hence Payments are pending only for Quarter 3 and 4.
Payment pending of Quarter 3 = $105000 * 20% = $21000
Payment pending of Quarter 4 = $120000 * 45% (25%+20%) = $54000
Total account receivable at the end of Quarter 4 = 21000+54000 = $75000

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