Question

Coyote Loco, Inc., a distributor of salsa, has the following historical collection pattern for its credit sales. 80 percent collected in the month of sale. 10 percent collected in the first month after sale. 5 percent collected in the second month after sale. 4 percent collected in the third month after sale. 1 percent uncollectible The sales on account have been budgeted for the last seven months as follows: $128,000 155,500 180,500 211,000 236,000 261,000 June July August September October November December 223,500 Required: 1. Compute the estimated total cash collections during October from credit sales. 2. Compute the estimated total cash collections during the fourth quarter from sales made on account during the fourth quarter. 1. Total cash collections 2. Total cash collections

Answer 1

1. Total Collection in October Month : $225125 (Refer-Working Note-1)

2. Total Collection fourth Quarter: $637900 (Refer Working Note-2)

Working for your easy understanding

Working note-1: Statement showing Estimated Total Cash Collection for Fourth Quarter
	Oct	Nov	Dec	Total
80 % Collected in the Month sales	$188,800	$208,800	$178,800	$576,400
	(236000*80%)	(261000*80%)	(223500*80%)
10% collected in First Month after Sales
September (211000*10%)	$21,100			$21,100
October (236000*10%)		$23,600		$23,600
Nov (261000*10%)			$26,100	$26,100
5% collected in Second Month after Sales
August (180500*5%)	$9,025			$9,025
September (211000*5%)		$10,550		$10,550
Oct (236000*5%)			$11,800	$11,800
4% collected in Third Month after Sales
Jul( 155500*4%)	$6,200			$6,200
August (180500*4%)		$7,220		$7,220
September (211000*4%)			$8,440	$8,440
Total Collection	$225,125	$250,170	$225,140	$700,435

Working Note-2: Statement showing Estimated Total Cash Collection for Fourth Quarter
	Oct	Nov	Dec	Total
80 % Collected in the Month sales	$188,800	$208,800	$178,800	$576,400
	(236000*80%)	(261000*80%)	(223500*80%)
10% collected in First Month after Sales
October (236000*10%)		$23,600		$23,600
Nov (261000*10%)			$26,100	$26,100
5% collected in Second Month after Sales
Oct (236000*5%)			$11,800	$11,800
Total Collection	$188,800	$232,400	$216,700	$637,900