Question

Paymore Products places orders for goods equal to 75% of its sales forecast in the next quarter. The sales forecasts for the next five quarters are as follows:

	Quarter in Coming Year					Following Year
	First	Second	Third	Fourth		First Quarter
Sales forecast	$476	$340	$353	$401		$401

On average, one-third of sales are collected in the quarter that they are sold, and two-thirds are collected in the following quarter. Assume that sales in the last quarter of the previous year were $353. What is the forecast for Paymore’s cash receipts in each quarter of the coming year? (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

Answer 1

Assume that purchase of 75% of next quarter sales is paid during the Quarter.

IQtr II Qtr III Qtr IV Qtr

Cash Receipt $394 $ 431 $ 344 $369

Cash Payment $255 $ 265 $ 301 $ 301

Net cash receipt $139 $166 $44 $68

Working:

	IV Qtr PY $	I Qtr $	II Qtr $	III Qtr $	IV Qtr $	I Qtr NY $
Sales	353	476	340	353	401	401
Collection During the Quarter 1/3		158.67	113.33	117.67	133.67
Collection During the next Quarter 2/3		235.33	317.33	226.67	235.33
Cash Receipt during the Quarter		394.00	430.67	344.33	369.00
Purchase During the Quarter 75% of next Quarter sales		255	264.75	300.75	300.75
Net cash receipt		139.00	165.92	43.58	68.25