Question

Birch Construction has the following historical pattern on 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.

The sales on open account have been budgeted for the first six months of 2018 as shown below:

                                Month                                  Sales

                                January                                $ 70,000

                                February                                 90,000

                                March                                   100,000

                                April                                       120,000

                                May                                       100,000

                                June                                         90,000

                                                                                                               

1. The estimated total cash collections during April 2019 from accounts receivable would be?
2. The estimated total cash collections during the second calendar quarter from sales made on open account during the second calendar quarter would be?

Answer 1

Birch Construction Requirement 1 Cash Collection Schedule For the month ending April 2018 April 70000 0.04 January 2800 February 9000 90000 0.1 March 15000 100000 0.15 April 120000*0.7 84000 Totals 108000 Requirement 2 Answer = $262000 The second calendar quarter consists of April, May, and June. For April's sales of $120,000, collections should be 95% (70% +15% + 10%), or $114,000. For May's sales of $100,000, collections should be 85% (70% +15%), or $85,000. For June's sales of $90,000, collections should be 70%, or $63,000. The quarterly total is $262,000 ($114,000+ $85,000+ $63,000)