Blanchard Corporation Is Estimating Its Cash Collections for the First

question 32

Essay

Blanchard Corporation is estimating its cash collections for the first quarter of next year (January, February and March).The company has provided you with monthly sales along with historical cash collections data.Calculate the total cash received for January, February and March given the following data:
$$\begin{array}{ | c | c | c | c | c | c | } \hline & \text { November } & \text { December } & \text { January } & \text { February } & \text { March } \\\hline \text { Sales } & \$ 250,000 & \$ 270,000 & \$ 290,000 & \$ 305,000 & \$ 315,000 \\\hline \text { Estimated Collection: }\\\hline 60 \% & \text { In month of sale } & & & \\\hline 30 \% & \text { In month after sale } & & & \\\hline 8 \% & \text { In second month after sale } & & & \\\hline 2 \% & \text { Never Collected } & & & \\\hline\end{array}$$

---

Definitions:

Intrinsic Value

The perceived or calculated true value of an asset, investment, or company based on fundamental analysis rather than current market price.

Equilibrium

A state in which market supply and demand balance each other, resulting in stable prices and no tendency for change.

Call

An options contract that gives the investor the right, but not the obligation, to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period.

Put

A financial derivative option that gives the holder the right, but not the obligation, to sell a security at a specified price within a specified time.