Sales on account for the first two months of the current year are budgeted as follows.
January $532,000
February 408,000
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.
Collections within the month of sale: | ||
Within discount period 60% | $ 2,39,904 | =408000*60%*98% |
After discount period 15 | $ 61,200 | =408000*15% |
Collections within the month following sale: | ||
Within discount period 15 | $ 78,204 | =532000*15%*98% |
After discount period 7 | $ 37,240 | =532000*7% |
Total Cash Collections (February) | $ 4,16,548 |
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