The following is the sales budget for Harp, Inc., for the first quarter of 2015:
ID: 2739598 • Letter: T
Question
The following is the sales budget for Harp, Inc., for the first quarter of 2015: January February March Sales budget: $ 211,000 $ 231,000 $ 254,000 Credit sales are collected as follows: 75 percent in the month of the sale 20 percent in the month after the sale 5 percent in the second month after the sale The accounts receivable balance at the end of the previous quarter was $95,000 ($65,000 of which was uncollected December sales).
a. Calculate the sales for November. (Round your answer to 2 decimal places, e.g., 32.16.) November sales $
b. Calculate the sales for December. (Round your answer to 2 decimal places, e.g., 32.16.) December sales $
c. Calculate the cash collections from sales for each month from January through March.(Round your answers to 2 decimal places, e.g., 32.16.)
Cash collections January $
February $
March $
Explanation / Answer
a) The November sales must have been the total uncollected sales minus the uncollected sales relating to December sales , and results shoule be divided by the collection rate two months after the sale.
therefore, November sales =($ 95,000-$ 65,000)/5% =$ 600,000
b) Sale for december can be computed as divide uncollected sales by the collection rate for the previous months’ sales
Uncollected sales =$ 65,000 and collection rate is 25%(20%+5%)
therefore, December sales =$ 65,000/25% =$ 260,000
C) cash collections from sales for each month from January through March
Cash collections is 75% of current sales +20% of previous month sales + 5% of 2 months ago sales
January sales collections Month Sales Rate Collections November 600,000 5% $ 30,000 December 260,000 20% $ 52,000 January 211,000 75% $ 158,250 Total $ 240,250 February sales collections Month Sales Rate Collections December 260,000 5% $ 13,000 January 211,000 20% $ 42,200 February 231,000 75% $ 173,250 Total $ 228,450 March sales collections Month Sales Rate Collections January 211,000 5% $ 10,550 February 231,000 20% $ 46,200 March 254,000 75% $ 190,500 Total $ 247,250Related Questions
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