The Maynard Company has projected the following quarterly sales amounts for the

Question

The Maynard Company has projected the following quarterly sales amounts for the coming year: Q1 Q2 Q3 Q4 Sales $480 $520 $610 $760 Required: (a) Accounts receivable at the beginning of the year are $240. Maynard has a 45-day collection period. Calculate cash collections in each of the four quarters by completing the following Q1 Q2 Q3 Q4 Beginning receivables $ $ $ $ Sales Cash collections Ending receivables $ $ $ $ (b) Accounts receivable at the beginning of the year are $270. Maynard has a 60-day collection period. Calculate cash collections in each of the four quarters by completing the following Q1 Q2 Q3 Q4 Beginning receivables $ $ $ $ Sales Cash collections Ending receivables $ $ $ $ (c) Accounts receivable at the beginning of the year are $270. Maynard has a 30-day collection period. Calculate cash collections in each of the four quarters by completing the following Q1 Q2 Q3 Q4 Beginning receivables $ $ $ $ Sales Cash collections Ending receivables $ $ $ $

Explanation / Answer

(a) 45-day collection period implies all receivables outstanding from previous quarter are collected in the current quarter, and (90-45)/90 = 1/2 of current sales are collected. b) 60-day collection period implies all receivables outstanding from previous quarter are collected in the current quarter, and (90-60)/90 = 1/3 of current sales are collected. (c) 30-day collection period implies all receivables outstanding from previous quarter are collected in the current quarter, and (90-30)/90 = 2/3 of current sales are collected.

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