Fundamentals of Corporate Finance
11th Edition
ISBN: 9781259870576
Author: Ross
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 18, Problem 10QP
Calculating Cash Collections [LO3] The following is the sales budget for Harp, Inc., for the first quarter of 2015:
![Chapter 18, Problem 10QP, Calculating Cash Collections [LO3] The following is the sales budget for Harp, Inc., for the first](http://dev-ingestion-image-output.s3-website-us-east-1.amazonaws.com/9780077861704/Chapter-18/images/61704-18-10qp-question-digital_image_001.png)
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 $93,000 ($62,000 of which was uncollected December sales).
a. Compute the sales for November.
b. Compute the sales for December.
c. Compute the cash collections from sales for each month from January through March.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Q7
The budgeted sales for the next four quarters are R192 000, R288 000, R288 000 and R336 000 respectively. It is estimated that sales will be paid for as follows:-75% of the total will be paid in the quarter that the sales were made. Of the balance 50% will be paid in the quarter after the sale was made. The remaining 50% will be paid in the quarter after this. The amount of cash received in the third quarter will be:
Select one:
a. R144 000
b. R240 000
c. R324 000
d. R276 000
Your company collected $304.00 million and spent $377.00 million this month. If previous month's cash position (cumulative cash) is $12.23 million and your company target cash position is $20.00 million. What's your company's cash surplus/shortage at the end of this month, with positive number indicates a surplus and negative number indicates a shortage?
The answer should be in millions of dollars
Pine Co. budgeted credit sales for the coming year is P900,000. A proposed relaxation of credit standards increase the Accounts receivable balance by P25,000. The average collection period is expected to increase from 20 to 25 days. How much is the budgeted credit sales of Pine Co. if the increase in average collection period to 25 days push through? (360 day year)a. 1,080,000b. 2,520,000c. 620,000d. 1,660,000
Chapter 18 Solutions
Fundamentals of Corporate Finance
Ch. 18.1 - What is the difference between net working capital...Ch. 18.1 - Prob. 18.1BCQCh. 18.1 - List five potential sources of cash.Ch. 18.1 - Prob. 18.1DCQCh. 18.2 - Prob. 18.2ACQCh. 18.2 - Prob. 18.2BCQCh. 18.2 - Prob. 18.2CCQCh. 18.3 - What keeps the real world from being an ideal one...Ch. 18.3 - What considerations determine the optimal size of...Ch. 18.3 - Prob. 18.3CCQ
Ch. 18.4 - Prob. 18.4ACQCh. 18.4 - Prob. 18.4BCQCh. 18.5 - Prob. 18.5ACQCh. 18.5 - Describe two types of secured loans.Ch. 18.6 - Prob. 18.6ACQCh. 18.6 - In Table 18.6, what would happen to Fun Toys...Ch. 18 - Prob. 18.1CTFCh. 18 - A firm has an operating cycle of 64 days and a...Ch. 18 - Prob. 18.4CTFCh. 18 - Prob. 18.5CTFCh. 18 - Operating Cycle [LO1] What are some of the...Ch. 18 - Prob. 2CRCTCh. 18 - Prob. 3CRCTCh. 18 - Cost of Current Assets [LO2] Loftis Manufacturing,...Ch. 18 - Operating and Cash Cycles [LO1] Is it possible for...Ch. 18 - Use the following information to answer Questions...Ch. 18 - Use the following information to answer Questions...Ch. 18 - Prob. 8CRCTCh. 18 - Use the following information to answer Questions...Ch. 18 - Use the following information to answer Questions...Ch. 18 - Changes in the Cash Account [LO4] Indicate the...Ch. 18 - Prob. 2QPCh. 18 - Changes in the Operating Cycle [LO1] Indicate the...Ch. 18 - Prob. 4QPCh. 18 - Calculating Cash Collections [LO3] The Morning...Ch. 18 - Prob. 6QPCh. 18 - Prob. 7QPCh. 18 - Calculating Payments [LO3] Sedman, Corp., has...Ch. 18 - Calculating Payments [LO3] The Torrey Pine...Ch. 18 - Calculating Cash Collections [LO3] The following...Ch. 18 - Calculating the Cash Budget [LO3] Here are some...Ch. 18 - Prob. 12QPCh. 18 - Prob. 13QPCh. 18 - Prob. 14QPCh. 18 - Calculating the Cash Budget [LO3] Wildcat, Inc.,...Ch. 18 - Prob. 16QPCh. 18 - Costs of Borrowing [LO3] In exchange for a 400...Ch. 18 - Prob. 18QPCh. 18 - Prob. 1MCh. 18 - Prob. 2MCh. 18 - Prob. 3M
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Use the information provided below to prepare the Cash Budget for January and February 2023:INFORMATIONThe following information was provided by Intel Enterprises:1. The bank balance on 31 December 2022 is expected to be R40 000 (unfavourable).2. Credit sales are expected to be as follows:December 2022 - R576 000 January 2023 - R540 000 February 2023 - R648 0003. Credit sales usually make up 40% of the total sales. Cash sales make up the balance. Cash customersreceive a 10% discount.4. Credit sales are normally collected as follows:* 30% in the month in which the transaction takes place, and these customers are entitled to a 5% discount.* 65% in the following monthThe rest is usually written off as bad debts.5. Budgeted purchases of inventory are as follows:December 2022 - R1 000 000 January 2023 - R800 000 February 2023 - R920 0006. Fifty percent (50%) of the purchases are for cash. The remainder is paid in the month after the purchase.7. The monthly salaries amount to R150 000.…arrow_forwardQ8) Prepare a cash budget for the first quarter for Shamz Logistics Inc., given the following data. Management has projected total and credit sales for the first three months of 2016 in the given table. Based on historical data, 40% of credit sales are collected in the month the sales were made, and 60% are collected the next month. Purchases are estimated to be 50% of the next month’s total sales, but are paid for in the month following the order. (Expenditure for inventory in each month is 50% of that month’s sales.) The beginning and target cash balance is $250,000. Month Year Credit sales December 2015 170,000 January 2016 160,000 February 2016 178,000 march 2016 185,000 Item January February March Wages 25,000 29,000 29,000 Rent 2,700 2,700 2,700 Other 1,000 1,200 1,400 Taxes 15,000 -- -- Dividend -- -- 4,000 Cap. Ex. -- 5,000 --arrow_forwardUse the information provided below to prepare the following for January and February 2023: 4.1 Debtors Collection Schedule 4.2 Cash Budget INFORMATIONThe following information was provided by Intel Enterprises:1. The bank balance on 31 December 2022 is expected to be R40 000 (unfavourable).2. Credit sales are expected to be as follows: December 2022 January 2023 February 2023 R576 000 R540 000 R648 000 3. Credit sales usually make up 40% of the total sales. Cash sales make up the balance. Cash customersreceive a 10% discount.4. Credit sales are normally collected as follows:* 30% in the month in which the transaction takes place, and these customers are entitled to a 5% discount.* 65% in the following monthThe rest is usually written off as bad debts.5. Budgeted purchases of inventory are as follows: December 2022 January 2023 February 2023 R1 000 000 R800 000 R920 000 6. Fifty percent (50%) of the purchases are for cash. The remainder is paid in the month after the…arrow_forward
- Mooney Equipment is putting together its cash budget for the following year and has forecasted expected cash collections over the next five quarters (one year plus the first quarter of the next year). The cash collection estimates are based on sales projections and expected collection of receivables. The sales and cash collection estimates are shown in the following table (in millions of dollars): Q1 Q2 Q3 Q4 Q5 Sales $1,100 $1,400 $1,450 $1,250 $1,500 Total cash collections $1,100 $1,150 $1,200 $1,200 You also have the following information about Mooney Equipment: • In any given period, Mooney’s purchases from suppliers generally account for 72% of the expected sales in the next period, and wages, supplies, and taxes are expected to be 15% of next period’s sales. • In the third quarter, Mooney expects to expand one of its plants, which will require an additional $1,072 million investment. • Every quarter, Mooney pays $60 million in interest and…arrow_forwardThe company’s budgeted sales for the coming year are P30,000,000 of which 70% are expected to be credit sales at terms of n/30. It estimates that a proposed relaxation of credit standards will increase credit sales by 30% and increase the average collection period from 20 days to 30 days. Based on a 360-day year, the proposed relaxation of credit to standards will result in an expected increase in the average accounts receivable balance of?arrow_forwardQUESTION 3 REQUIRED Use the information provided below to prepare the following for Mustang Enterprises for January and February 2024. 3.1 Debtors Collection Schedule 3.2 Cash Budget. INFORMATION The following information was supplied by Mustang Enterprises: 1. Mustang Enterprises expects to have an unfavourable bank balance of R40 000 on 31 December 2023. 2. The monthly sales were projected as follows: 2023 Units November 44 000 December 53 000 2024 Units January 47 000 February 31 000 3. The selling price is R20 per unit (excluding any discounts). All the goods produced each month are expected to be sold in the same month. Sixty percent (60%) of the sales is expected to be on credit and the balance is for cash. Thirty percent (30%) of the cash sales is subject to a discount of 10%. 4. Credit sales are usually collected as follows: 20% in the month of sale, and these debtors receive a 5% discount. 75% in the month after the sale, and the rest is usually written off as bad debts. 5.…arrow_forward
- Here is a forecast of sales by National Bromide for the first 4 months of 2022 (figures in thousands of dollars): Month: 1 2 3 4 Cash sales 34 43 37 33 Sales on credit 195 215 185 165 On average, 60% of credit sales are paid for in the current month, 20% in the next month, and the remainder in the month after that. What are the expected cash collections in months 3 and 4? Note: Enter your answers in whole dollars not in thousands of dollars.arrow_forwardQuestion A20 Quarkers Ltd is producing its cash budgets and have found based on past experience that money is received from sales on the following timescale: 55% in the month the sale was made 25% in the month after the sale was made 17% 2 months after the sale was made 3% Not received. Sales are forecast as follows: March - £150,000 April - £175,000 May - £182,000 June - £202,000 What are the forecast cash receipts in the month of June?arrow_forwardCapital budgeting 21. An investment of $894,168 promises to return $180,000 each year for the next eight years. If taxes are ignored, what is the internal rate of return?A. less than 9%B. 10%C. 12%D. more than 14% 22. An investment is expected to generate returns of $60,000 per year for each of the next six years. If the initial amount invested is $240,000 and taxes are ignored, which of the following is closest to the internal rate of return?A. 15%B. 13%C. 10%D. 7%arrow_forward
- Question 9 The Hothi Company prepares monthly cash budgets. Relevant data from operating budgets for 2023 are as follows: January February Sales $ 350,000 $ 400,000 Direct materials purchases 120,000 110,000 Selling and administrative expenses 220,000 267,000 Cash balances: The Hothi Company expects its cash balance on January 1, 2023, to be $50,000. It wants to maintain a cash balance of $40,000 by using its line of credit (ignore calculation and repayments of interest). Cash receipts: All sales are on account. The company expects collections to be 50% in the month of sale, 40% in the first month following the sale, and 10% in the second month following the sale. Credit sales: November 2022, $200,000; December 2022, $280,000 Cash disbursements: It pays 30% of direct materials purchases in cash in the month of…arrow_forwardA proposed relaxation of credit standards of Mama Inc. will increase the balance of accounts receivable by P95,000. The proposed relaxation will also increase the average collection period from 16 days to 3 weeks. How much is the increase in budgeted credit sales of Mama Inc. if the firm increase the average collection period to 3 weeks? Use 360 days. 6,480,000 3,025,000 6,300,000 1,750,000arrow_forwardCash 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 $165 million. In addition to this basic trend, the seasonal adjustments for the four quarters are, in millions, 0, -$12, –$6, and $18, 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 $84 million. Assuming all sales are on credit, compute the cash collections from sales for each quarter. Don't round off until you get to the end.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Responsibility Accounting| Responsibility Centers and Segments| US CMA Part 1| US CMA course; Master Budget and Responsibility Accounting-Intro to Managerial Accounting- Su. 2013-Prof. Gershberg; Author: Mera Skill; Rutgers Accounting Web;https://www.youtube.com/watch?v=SYQ4u1BP24g;License: Standard YouTube License, CC-BY