Question

Tiara Company has the following historical collection pattern for its credit sales: 70% collected in month of sale 15% collected in the first month after sale 10% collected in the second month after sale 4% collected in the third month after sale 1% uncollectible Budgeted credit sales for the last six months of the year follow. $ June July August September October November December 32,000 30,000 35,000 40,000 45,000 50,000 42,500 I Required: A. What would be the estimated total cash collections during October from October credit sales? B. What would be the estimated total cash collections during October from September credit sales? C. What would be the estimated total cash collections during October from August credit sales? D. What would be the estimated total cash collections during October from July credit sales? E. What would be the estimated total cash collections during October from June credit sales? E. Compute the estimated total cash collections during October from credit sales.

Answer 1

A. Information given in the Question Estimated Cash Collection from October Gedit sales => 707 of Sredit sales is Collected during the month of sale Cash Collection = 45,000 470% = 31,500 B. Cash Collection a) Given that 15% of Credit sale is Collected in the next first Morth i. 15% Sales los September is collected in October Cash Collections from September Credit sale 40006 X 15% 6000 C. Cash Collections during October food August Credit sales =) Given that 10% of Credit sale is Collected second month after sale 10% of Gredit Sale in August is collected in October cast collection from August in october 35000x10% 5 3500 20 D. Cash Collections during Octobeo from July Credit sale =) Given that 4% of credit sale is Collected in 3rd Month after sale 4% of Credit sale in July is collected in October 7 Cash Collection from July Credit sale = 30,000x4% = 1200 no 25 1%, is uncollectible and remaining E. There will be Collections in October from June Gedit sale since it is estimated that 99% is collected already Poo upto September. "o" in October F. Total Collections from Credit Sales & 70% October Gredit sale + 154 September credit sale August 31,500+ 6000 + 3500 + 1200 in is + 10% 30 Credit sale + 4% July Credit sale 42,200