The sales budget for your company in the coming year is based on a quarterly gro

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 $225.6 million. In addition to this basic trend, the seasonal adjustments for the four quarters are 0, $16.6, $8.6, and $21.6 million, respectively. Generally, 50 percent of the sales can be collected within the quarter and 45 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 $104.6 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.)

  

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 $225.6 million. In addition to this basic trend, the seasonal adjustments for the four quarters are 0, $16.6, $8.6, and $21.6 million, respectively. Generally, 50 percent of the sales can be collected within the quarter and 45 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 $104.6 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.)

Explanation / Answer

**Accounts receivable at beginning of quarter is 50% (since 50% collected in month of sales)

so Collection will equal :104,600,000*.45/.50 = 94,140,000    [5%is bad debt]

Quarter 1 2 3 4 sales 225,600,000 248,160,000   [225600000*1.1] 272,976,000    [248160000*1.1] 300,273,600   [272976000*1.1] Less/add adjustment 0 -16,600,000 -8,600,000 21,600,000 Sales after adjustment 225,600,000 231,560,000 264,376,000 321,873,600 collection within quarter(50%) 112,800,000   [225600000*.50] 115,780,000   [231560000*.50] 132,188,000 160,936,800 collection from previous quarter 94,140,000** 101,520,000    [225600000*.45] 104,202,000   [231560000*.45] 118,969,200   [264,376,000] Total 206,940,000 217,300,000 236,390,000 279,906,000

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