Concept explainers
Calculating Cash Collections. The Jallouk Company has projected the following quarterly sales amounts for the coming year:
a. Accounts receivable at the beginning of the year are $330. The company has a 45-day collection period. Calculate cash collections in each of the four quarters by completing the following:
b. Rework part (a) assuming a collection period of 60 days.
c. Rework part (a) assuming a collection period of 30 days.
a)
To determine: The cash collection for each four quarters, when the collection period is 45days.
Introduction:
Cash collection is the amount collected through business. It is a task of accounts receivables.
Answer to Problem 5QP
Q1-$623
Q2-$630
Q3-$653
Q4-$763
Explanation of Solution
Given information:
Accounts receivable at the beginning of the year is $345, and the collection period is 45 days.
Compute the cash collection for each four quarters:
Note: All the receivables, which are outstanding, will be collected in the current year.
Compute the ending receivables for quarter 1:
Therefore, the ending receivable will be half of the current year sales.
Hence, the ending receivables are $293.
Compute the cash collection for quarter 1:
Hence, the cash collected for the quarter 1 is $623.
Compute the ending receivables for quarter 2:
Hence, the ending receivables are $338.
Compute the cash collection for quarter 2:
Hence, the cash collected for the quarter 2 is $630.
Compute the ending receivables for quarter 3:
Hence, the ending receivables are $315.
Compute the cash collection for quarter 3:
Hence, the cash collected for the quarter 1 is $653.
Compute the ending receivables for quarter 4:
Hence, the ending receivables are $448.
Compute the cash collection for quarter 4:
Hence, the cash collected for the quarter 1 is $763.
b)
To determine: The cash collection for each four quarters, when the collection period is 60 days.
Introduction:
Cash collection is the amount collected through business. It is a task of accounts receivables.
Average cash collection period is the number of days taken to collect the cash from the customers.
Answer to Problem 5QP
Q1-$720
Q2-$645
Q3-$645
Q4-$807
Explanation of Solution
Given information:
Accounts receivables at the beginning of the year are $345 and the collection period is 60 days.
Compute the cash collection for each four quarters:
Note: All the receivables, which are outstanding, will be collected in the current year.
Compute the ending receivables for quarter 1:
Therefore, the ending receivable will be half of the current year sales.
Hence, the ending receivables are $195.
Compute the cash collection for quarter 1:
Hence, the cash collected for the quarter 1 is $720.
Compute the ending receivables for quarter 2:
Hence, the ending receivables are $225.
Compute the cash collection for quarter 2:
Hence, the cash collected for the quarter 2 is $645.
Compute the ending receivables for quarter 3:
Hence, the ending receivables are $210.
Compute the cash collection for quarter 3:
Hence, the cash collected for the quarter 1 is $645.
Compute the ending receivables for quarter 4:
Hence, the ending receivables are $298.
Compute the cash collection for quarter 4:
Hence, the cash collected for the quarter 1 is $807.
c)
To determine: The cash collection for each four quarters, when the collection period is 30 days.
Introduction:
Cash collection is the amount collected through business. It is a task of accounts receivables.
Average cash collection period is the number of days taken to collect the cash from the customers.
Answer to Problem 5QP
Q1-$525
Q2-$615
Q3-$660
Q4-$718
Explanation of Solution
Given information:
Accounts receivable at the beginning of the year is $345, and the collection period is 30 days.
Compute the cash collection for each four quarters:
Note: All the receivables, which are outstanding, will be collected in the current year.
Compute the ending receivables for quarter 1:
Therefore, the ending receivable will be half of the current year sales.
Hence, the ending receivables are $390.
Compute the cash collection for quarter 1:
Hence, the cash collected for the quarter 1 is $525.
Compute the ending receivables for quarter 2:
Hence, the ending receivables are $450.
Compute the cash collection for quarter 2:
Hence, the cash collected for the quarter 2 is $615.
Compute the ending receivables for quarter 3:
Hence, the ending receivables are $420.
Compute the cash collection for quarter 3:
Hence, the cash collected for the quarter 1 is $660.
Compute the ending receivables for quarter 4:
Hence, the ending receivables are $597.
Compute the cash collection for quarter 4:
Hence, the cash collected for the quarter 1 is $718.
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Chapter 16 Solutions
Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
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- Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College