The following is the sales budget for Tesoro Azul, Inc., for the first quarter o
ID: 2576766 • Letter: T
Question
The following is the sales budget for Tesoro Azul, Inc., for the first quarter of 2016:
Credit sales are collected as follows:
55 percent in the month of the sale
25 percent in the month after the sale
20 percent in the second month after the sale
The accounts receivable balance at the end of the previous quarter was $121,100 ($87,300 of which was uncollected December sales).
a. Compute the sales for November. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
Sales $
b. Compute the sales for December. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
Sales $
c. Compute the cash collections from sales for each month from January through March. (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.)
Explanation / Answer
a)
The November sales must have been the total uncollected sales minus the uncollected sales from December, divided by the collection rate two months after the sale, so:
November sales = ($121,100 – $87,300)/0.20
November sales = $169000.00
b)
The December sales are the uncollected sales from December divided by the collection rate of the previous months’ sales, so:
December sales = $87,300/0.45
December sales = $194,000.00
c)
The collections each month for this company are:
Collections = 0.20(Sales from 2 months ago) + 0.25(Last month’s sales) + 0.55 (Current sales)
January collections = 0.20($169000.00) + 0.25($194,000.00) + 0.55($132,000)
January collections = $154,900.00
February collections = 0.20($194,000.00) + 0.25($132,000) + 0.55($149,000)
February collections = $153,750.00
March collections = 0.20($132,000) + 0.25($149,000) + 0.55($164,000)
March collections = $153,850.00
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