hang Distributors, a wholesale company, is considering whether to open a new distribution center. The center would open January 1, 2016. To make the decision, the planning committee requires a master budget for the first quarter of operation (January, February, and March 2016). Construct the first quarter master budget based on the following.

a. January sales are estimated to be $400,000 (of which $100,000 will be cash sales and $300,000 will be on credit). The company expects sales to grow 10% per month for the first few months of operation, and for cash sales to be the same percentage as in January..

Prepare a sales budget for the first quarter.

b. The company expects to collect 100% of accounts receivable in the month following the sale. Prepare a schedule of expected cash receipts for the first quart wer.

Use the information developed in requirements a and b to determine the amount of accounts receivable on the March 31 pro forma balance sheet and the amount of sales on the first quarter pro forma income statement.

CHALLENGE How will the cash budget be affected if it is determined that sales on account in February will be 10% uncollectable?