Question

Lua, Inc. has completed it’s sales budget for the 1st quarter of 2019. Projected sales for...

Lua, Inc. has completed it’s sales budget for the 1st quarter of 2019. Projected sales for the 3 months are as follows:

Jan: $30, 000

Feb: $100,000

March: $50,000

The company’s past records show collection 30% is paid in cash and 70% is paid in credit. Of the sales paid with credit, 20% is collected in the month of the sale and 80% is collected the following month. Enter a number (no punctuation or characters).

a. What is the total expected cash collection for Feb?

b. What is the expected Accounts Receivable balance for March 31, 2019?

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Answer #1

A. Calculation of expected cash collection for month Feb.

Jan Credit sales = total sales × 70% = 30000×70%=21000

Feb credit sales = 100000×70% =70000

March credit sales = 50000 ×70% = 35000

Particulars calculation amount in $
Cash collection from previous month (jan credit sale × 80%) 21000×80% 16800
Cash sales in Current month (Feb sales ×30%) 100000×30% 30000
Collection from credit sale in current month (Feb credit sale × 20%) 70000×20% 14000
Total collection in Feb month 60800

b. Calculation of expected account receivables balance on March 31.2019

Balance of account receivables will be 80%of credit sale in the March month. Because all the previous month credit sales will be paid off

balance as on 31.01.2019 = 35000×80% = 28000

Thank you! ?

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