Budgeting Cash Collections
Spencer Consulting, which invoices its clients on terms 2/10, n/30,
had credit sales for May and June of $150,000 and $170,000,
respectively. Analysis of Spencer’s operations indicates that the
pattern of customers’ payments on account is as follows
(percentages are of total monthly credit sales):
Receiving Discount |
Beyond Discount Period |
Totals | |||||
---|---|---|---|---|---|---|---|
In month of sale | 50% | 25% | 75% | ||||
In month of following sale | 10% | 10% | 20% | ||||
Uncollectible accounts, returns, and allowances | 5% | ||||||
100% |
Determine the estimated cash collected on customers’ accounts in June.
Ans: cash collections from customers In m/o June
May month sale=
Customer receiving discount= $150000*10%*98%
=$ 14,700
customer not receiving discount=$150,000*10%
= $15,000
June month sale=
Customer receiving discount= $170,000* 50%*98%
= $83,300
customer not receiving discount = $170000*25%
= $ 42,500
Total cash collections from customers= $155,500
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