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The following is the sales budget for Profit, Inc
The following is the sales budget for Profit, Inc., for the first quarter of 2018: Sales budget January February March $200,000 $220,000 $243,000 Credit sales are collected as follows: 65 percent in the month of the sale 20 percent in the month after the sale 15 percent in the second month after the sale The accounts receivable balance at the end of the previous quarter was $84,000 ($54,000 of which was uncollected December sales) a. Calculate the sales for November. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Calculate the sales for December. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. Calculate the cash collections from sales for each month from January through March. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)
65 percent in the month of the sale 20 percent in the month after the sale 15 percent in the second month after the sale The accounts receivable balance at the end of the previous quarter was $84,000 ($54,000 of which was uncollected December sales). a. Calculate the sales for November. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Calculate the sales for December. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. Calculate the cash collections from sales for each month from January through March. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) a. November sales b. December sales c. January cash collections February cash collections March cash collections
Expert Solution
Answer to Part a:
Accounts Receivable on December 31 = $84,000
Out of Which Uncollected December Sales = $54,000
Uncollected November Sales = $84,000 - $54,000 = $30,000
Sales for November = Uncollected November Sales / Uncollected November Sales %
Sales for November = $30,000 / 0.15
Sales for November = $200,000
Answer to Part b:
Uncollected December Sales = $54,000
Sales for December = Uncollected December Sales / Uncollected December Sales %
Sales for December = $54,000 / (0.20 + 0.15)
Sales for December = $54,000 / 0.35
Sales for December = $154,285.71
Answer to Part c:
Collection in January = (November Sales * 15%) + (December Sales * 20%) + (January Sales * 65%)
Collection in January = ($200,000 * 15%) + ($154,285.71 * 20%) + ($200,000 * 65%)
Collection in January = $30,000 + $30,857.14 + $130,000
Collection in January = $190,857.14
Collection in February = (December Sales * 15%) + (January Sales * 20%) + (February Sales * 65%)
Collection in February = ($154,285.71 * 15%) + ($200,000 * 20%) + ($220,000 * 65%)
Collection in February = $23,142.86 + $40,000 + $143,000
Collection in February = $206,142.86
Collection in March = (January Sales * 15%) + (February Sales * 20%) + (March Sales * 65%)
Collection in March = ($200,000 * 15%) + ($220,000 * 20%) + ($243,000 * 65%)
Collection in March = $30,000 + $44,000 + $157,950
Collection in March = $231,950.00
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