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ankoles [38]
3 years ago
7

Adams Pointers Corporation expects to begin operations on January 1, 2019; it will operate as a specialty sales company that sel

ls laser pointers over the Internet. Adams expects sales in January 2019 to total $340,000 and to increase 15 percent per month in February and March. All sales are on account. Adams expects to collect 66 percent of accounts receivable in the month of sale, 22 percent in the month following the sale, and 12 percent in the second month following the sale.
Required:
A. Prepare a sales budget for the first quarter of 2019.
B. Determine the amount of sales revenue Adams will report on the first 2019 quarterly pro forma income statement.
C. Prepare a cash receipts schedule for the first quarter of 2019.
D. Determine the amount of accounts receivable as of March 31, 2019.
Business
1 answer:
Andrej [43]3 years ago
7 0

Answer:

a) The Sales Budget for the 2019 first quarter will be:

January - $340,000

February - $391,000 (340,000 x 1.15)

March - $449,650 (391,000 x 1.15)

b) The amount of sales revenue to be reported for the first 2019 quarter is $1,180,650, i.e. the total of sales from January to March.  This equals $1,180,650 (340,000 + 391,000 + 449,650).

c) The cash receipts schedule for the first quarter of 2019 will look like this:

January - 66% of $340,000 = $224,400.

February - 66% of $391,000 + 22% of $340,000 = $332,860.

March - 66% of $449,650 + 22% of $391,000 + 12% of $340,000 = $373,589.

Total cash receipts for the first quarter is $930,849 (224,400 + 332,860 + 373,589)

d) The amount of accounts receivable as of March 31, 2019 is $249,801 (the difference between total quarter sales of $1,180,650 and total quarter cash receipts of $930,849)

Explanation:

A Sales Budget is prepared to determine the sales outlook given certain units of sales at given price units based on prevailing business environment.  It is an educated guess, like all estimates, to value the outcome of a company's sales efforts in the future.

The sales budget determines the revenue to be anticipated and reported.  It is also the basis for cash receipts and the balance of the accounts receivable.

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Explanation:

For calculating the external financing , we first have to take out what the sales , cost , asset , liability will be when the sales of the company increases by 17%, so now we have to calculate all the values -

   SALES    = $11,100 X 1.17  ( multiplying by 17% because of increase in sale)

                  = $12,987  

   COST = $7900 X 1.17  (multiplying by 17%)

              = $9243

INCOME BEFORE TAX = SALES - COST

                                       = $12,987 - $9243

                                       = $3744

TAXES AT 24% ON TAXABLE INCOME OF $3744

             = .24 X $3744 =$ 898.56

Now subtracting this amount from taxable income

$3744 - $898.56 = $2,845.44

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40% of $2,845.44 = .40 x $2845.44

= $1138.176

RETAINED EARNINGS = Taxable income - Dividend payout

                                     = $2845.44 - $1138.176

                                     = $1707.264

NOW TOTAL ASSETS WOULD BE = $15,600(5400+10200) X 1.17

                                                         = $18,252

IT IS GIVEN IN THE QUESTION THAT COST, ASSET, LIABILITY(CURRENT) ARE ALL PROPORTIONAL TO SALES.

CURRENT LIABILITY = $3300 X 1.17

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TOTAL COST = LONG TERM LIABILITY + CURRENT LIABILITY

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                      = $8681

TOTAL EQUITY EQUAL = $7480 + $1707.264 (RETAINED EARNINGS)

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EXTERNAL FINANCING = ASSET - LIABILITY - EQUITY

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2. Free entry, and exit

3. Deals with same or homogeneous products

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5. There is no transport cost

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So, the correct option is D.

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