Question

Glacier Company is budgeting for cash collections for the first fiscal quarter. Jan, Feb, and Mar sales are $250,000, $230,000, and $295,000, respectively A total of 80% of all sales are credit sales and 20% are cash sales 90% of credit sales are collected in the month of the sale and 6% are collected in the next month Bad debts average 4% Show how much cash will be collected for the months of February and March February March

Answer 1

February cash collections = February cash sales + 90% of February credit sales + 6% of January credit sales

= ($230,000 * 20%) + ($230,000 * 80% * 90%) + ($250,000 * 80% * 6%)

= $46,000 + $165,600 + $12,000

= $223,600

March cash collections = March cash sales + 90% of March credit sales + 6% of February credit sales

= ($295,000 * 20%) + ($295,000 * 80% * 90%) + ($230,000 * 80% * 6%)

= $59,000 + $212,400 + $11,040

= $282,440