Question

In an effort to improve cash collection, Suburban Medical Clinic offers terms of 2/10, n/30, with a 5% discount on patient payments made with cash. Suburban estimates its total billings for the second calendar quarter of the year as follows: April, $200,000; May, $240,000; and June, $290,000. Historically, Suburban has had the following patient collection patterns:

In month of sale: Cash at time of sale 25% On account during the discount period 20% On account after the discount period 10%

In month following sale: On account after the discount period 25%

In second month following sale: On account after discount period 15% Average portion uncollectible 5%

What would be Suburban’s budgeted total cash collections for June?

Answer 1

Budgeted Total Cash Collections for June
Cash sales of June:
Cash sales ($290000*25%)	$72500
Less: Discount on cash payment (72500*5%)	(3625)	68875
Credit sale of June:
During the discount period ($290000*20%)	58000
Less: Discount on credit sale (58000*2%)	(1160)
	56840
After the discount period ($290000*10%)	29000	85840
Cash collected from the sale of May ($240000*25%)		60000
Cash collected from the sale of April ($200000*15%)		30000
Budgeted total cash collections for June		$244715