Question

Sales on account for the first two months of the current year are budgeted as follows.

  

January	$	749,000
February		872,000

  

All sales are made on terms of 2/10, n/30 (2 percent discount if paid in 10 days, full amount by 30 days); collections on accounts receivable are typically made as follows.

  

Collections within the month of sale:
Within discount period	60	%
After discount period	15
Collections within the month following sale:
Within discount period	15
After discount period	7
Returns, allowances, and uncollectibles	3
Total	100	%

Compute the estimated cash collections on accounts receivable for the month of February.

Answer 1

Answer

Cash Collected from Febraury Sales:
Cash received within discount period [($ 872000 x 60%)-2%]	$512,736
Cash received after discount period [$872000 x 15%]	$130,800
		$643,536
Cash Collected from Januaray Sales:
Cash received within discount period [($ 749000 x 15%)-2%]	$110,103
Cash received after discount period [$749000 x 7%]	$52,430
		$162,533
Total Cash collections for the month of February		$806,069 Answer