Question

The sales budget for your company in the coming year is based on a quarterly growth rate of 20 percent with the first-quarter sales projection at $226.3 million. In addition to this basic trend, the seasonal adjustments for the four quarters are 0, −$17.3, −$9.3, and $22.3 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 $105.3 million. Assuming all sales are on credit, compute the cash collections from sales for each quarter.

Answer 1

	QTR 1	QTR 2	QTR 3	QTR 4
Sales	226.30	271.56	325.87	391.05
Seasonal adjustments	0.00	-17.30	-9.30	22.30
Sales after seasonal adjustment	226.30	254.26	316.57	413.35
CASH COLLECTIONS:
From the sales of the quarter (50%)	113.15	127.13	158.29	206.67
From the sales of the previous quarter (45%)	94.77	101.84	114.42	142.46
	[105.3*0.45/0.50)	[226.30*45%]	[254.26*45%]	[316.57*45%]
Cash collections from sales for each month	207.92	228.97	272.70	349.13