Welch Company, which expects to start operations on January 1, 2011, will sell d

Question

Welch Company, which expects to start operations on January 1, 2011, will sell digital cameras in shopping malls. Welch has budgeted sales as indicated in the following table. The company expects a 10 percent increase in sales per month for February and March. The ratio of cash sales to sales on account will remain stable from January through March. Sales......................................January.......................February........................March Cash sales $40,000 ? ? Sales on account $100,000 ? ? Total budgeted sales &140,00 ? ? Required: a. Complete the sales budget by filling in the missing amounts. b. Determine the amount of sales revenue Welch will report on its first quarter pro forma income statement.

Explanation / Answer

Total Sales : 29% Cash (40,000/140,000) & 71% On account (100,000/140,000) Feb Mar Cash sales 44,660 49,126 Sales on account 109,340 120,274 Total budgeted sales 154,000 169,400 Calculate the total sales first with 10% increase per month, then multiply total sales with Cash % and On account % to come up with cash and on account sales amount of each months. $140,000 + $154,000 + $169,400 = $ 463400 should be reported in the first quarter pro formal income statement.

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