Final answer:
The cash collections for Alliah in the second quarter, we must add up the revenues from the second quarter sales for which 40% is collected in the same quarter and the remaining 50% of the first quarter sales collected in the second quarter. Based on the given data, the total cash collected in the second quarter should be $14.6 million.
Step-by-step explanation:
The question asks to calculate the cash Alliah will collect in the second quarter of next year based on the provided sales data and payment collection schedule. The number of airplanes Alliah expects to sell in each quarter and the percentage of payment collected in the corresponding quarters must be considered. Here, we'll break down the cash collection for the second quarter from sales in the first and second quarters as well as accounts receivable.
From the first quarter, Alliah sold 14 airplanes at $1 million each, thus making $14 million in sales. 40% of this quarter's sales are collected in the first quarter itself, meaning 60% will be collected in later quarters. For the first quarter sales, Alliah would collect the remaining 50% in the second quarter, which amounts to $7 million (14 planes x $1 million x 50%).
In the second quarter, 19 airplanes are expected to be sold, also at $1 million each, amounting to $19 million in sales. Alliah collects 40% of the sales in the same quarter, resulting in $7.6 million (19 planes x $1 million x 40%) collected during the second quarter from second-quarter sales.
The accounts receivable at the beginning of the year is $10.2 million, of which $9 million relates to sales from the prior (fourth) quarter and would be collected in full in the first quarter. The $1.2 million, which relates to sales two quarters ago, has likely already been mostly collected, leaving potentially the last 10% to be collected in the first quarter. However, this amount would not affect the second quarter's collections.
Adding the collections from the sales of the first quarter ($7 million) and the sales of the second quarter ($7.6 million) to the beginning receivables expected to be collected in the second quarter ($0, since they have been collected in the first quarter), we can calculate the total cash collected in the second quarter to be $14.6 million. This is not one of the provided options, so it's important to review the question to ensure no mistakes were made in the calculation.