Question

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

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.

Homework Answers

Answer #1
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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