Question

It is November 1 of Year 1. Sales for Joseph Company for November and December of Year 1 and January (of Year 2) are forecasted to be as follows:

November, 300,000; December 700,000; January, 200,000

90% of sales are credit sales; the remaining sales are cash sales. Of these credit sales, 15% are collected during the month of sale, 25% in the following month, and 50% in the second following month; 10% are never collected. Total sales for September and October of Year 1 were 100,000 and 150,000, respectively.

What is the forecasted amount of total cash collections in January of Year 1?

Answer 1

1. Total Cash Collection -

Joseph Company Total cash collections in January Cash Sales 20,000 Credit Collection: November Sales December Sales January Sales 135,000 157,500 27,000 Total Cash Collection 339,500

2. Working Notes -

Working Notes September October November December January Sales 100,000 150,000 300,000 700,000 200,000 Cash Sales Credit Sales 10% 90% 10,000 90,000 15,000 135,000 30,000 270,000 70,000 630,000 20,000 180,000 Credit Collection In the Same Month In the following Month In the 2nd Month Uncollectible 15% 25% 50% 10% 40,500 33,750 45,000 27,000 94,500 67,500 67,500 63,000 27,000 157,500 135,000 18,000