Spalding Pointers Corporation expects to begin operations on January 1, 2019; it will operate as a specialty sales company that sells laser pointers over the Internet. Spalding expects sales in January 2019 to total $120,000 and to increase 5 percent per month in February and March. All sales are on account. Spalding expects to collect 70 percent of accounts receivable in the month of sale, 20 percent in the month following the sale, and 10 percent in the second month following the sale. Required Prepare a sales budget for the first quarter of 2019. Determine the amount of sales revenue Spalding will report on the first 2019 quarterly pro forma income statement. Prepare a cash receipts schedule for the first quarter of 2019. Determine the amount of accounts receivable as of March 31, 2019.

Solution and Explanation:

a) The Sales budget

                             January   February                                 March

Sales revenue120000          126000                               132300  

                                         (120000 multiply with 1.05)  (126000 multiply 1.05)  

b) The Sales revenue = 120000 plus 126000 plus 132300 = 378300

c) The Schedule of the Cash receipt

                                                           JanuaryFebruary     March

Receipt from January Sales                     840002400012000

Receipt from February Sales                           8820025200

Receipt from March Sales                                             92610

Total                                                        84000112200129810

d) The Account receivable is c = = 52290

the correct answer is b.)