Problem 26-12 Cash Budgeting The sales budget for your company in the coming yea

Question

Problem 26-12 Cash Budgeting

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

Cash collections from sale is as follows:

Particulars Quarter 1($) Quarter 2($) Quarter 3($) Quarter 4($) Sales 225            247.50            272.25            299.48 Seasonal adjustments 0 -16 -8 21 Net sales 225 231.5 264.25 320.475 Collection within the quarter 112.5 123.75 136.125 149.7375 Collection from previous quarter 140 101.25 104.175 118.9125 Cash collections from sale 252.5 225 240.3 268.65

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