Question

Starfish Industries’ sales budget for the first quarter of the upcoming year shows budgeted sales of $325,000, $350,000, and $310,000 in January, February, and March, respectively. All sales are made on credit. The cash receipts budget for March shows total cash receipts equal to $296,780. Starfish grants a discount to customers who pay within 10 days of the invoice. Starfish collects 60% of sales within the discount period, 20% in the month of sale but outside the discount period, 15% in the month following sale and the remainder is uncollectible. What is the discount offered by Starfish, and what are the cash collections in March associated with March sales?

A	1.5%; $183,210

B	1.5%; $245,210

C	2%; $182,280

D	2%; $244,280

Answer 1

	february	march
sales	350000	310000
collected in march from February sales 15%		52500[350000*15%]	As 15% are collected in following month
Total cash collection		$296780
the cash collections in March associated with March sales?		$244,280	[296780-52500for February]

cash for march sales should have been = 310000$ sales * 60% +310000*20%

186000+62000

=248000$

however the actual collection is $244280 so the difference is the discount

=248000-244280

=3720$ Is discount.

discount is given on 60% of sales = 186000$'

percentage of discount = 3720/186000

=2%

ANSWER D