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 million. In addition to this basic trend, the seasonal adjustments for the four quarters are 0, $16, $8, and $21 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 million. Assuming all sales are on credit, compute the cash collections from sales for each quarter. (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)

  

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 million. In addition to this basic trend, the seasonal adjustments for the four quarters are 0, $16, $8, and $21 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 million. Assuming all sales are on credit, compute the cash collections from sales for each quarter. (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)

Explanation / Answer

Note: for quarter 1, collection from previous quarter = beginning recievables * 0.9

because beginning recievables = 50% of previous quarter sales

There fore previous quarter sales = 208

45% of 208 = 93.6 = 90% 0f 104

Beginning receivables 104     Quarter 1    Quarter 2     Quarter 3    Quarter 4 Sales 225 247.5 272.25 299.475 Seasonal adjustment 0 -16 -8 21 adjusted sales 225 231.5 264.25 320.475 Collected within quarter 112.5 115.75 132.125 160.2375 Collection from previous quarter 93.6 101.25 104.175 118.9125 Cash collections from sales 206.1 217 236.3 279.15

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