Question

In an effort to improve cash collection, Suburban Medical Clinic offers terms of 2/10, n/30, with a 5% discount on patient payments made with cash. Suburban estimates its total billings for the second calendar quarter of the year as follows: April, $400,000; May, $480,000; and June, $580,000. Historically, Suburban has had the following patient collection patterns: Portions of Total Sales In month of sale: Cash at time of sale 25% On account during the discount period 20% On account after the discount period 10% In month following sale: On account after the discount period 25% In second month following sale: On account after discount period 15% Average portion uncollectible 5% 100% What would be Suburban’s budgeted total cash collections for June?

Answer 1

ANSWER

Budgeted Total Cash Collections for June
Cash sales of June:
Cash sales ($580,000*25%)	$145,000
Less: Discount on cash payment (145,000*5%)	(7,250)	137,750
Credit sale of June:
During the discount period ($580,000*20%)	116,000
Less: Discount on credit sale (116,000*2%)	(2,320)
	113,680
After the discount period ($580,000*10%)	58,000	171,680
Cash collected from the sale of May ($480,000*25%)		120,000
Cash collected from the sale of April ($400,000*15%)		60,000
Budgeted total cash collections for June		$489,430

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