Question

he following credit sales are budgeted by Wildhorse Co.: January $330500 February 486000 March 680400 April...

he following credit sales are budgeted by Wildhorse Co.:

January $330500
February 486000
March 680400
April 583200


The company’s past experience indicates that 70% of the accounts receivable are collected in the month of sale, 20% in the month following the sale, and 8% in the second month following the sale. The anticipated cash inflow for the month of March is

$599920.

$544320.

$583200.

$571540.

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Answer #1

Option a) $599920 is the correct answer.

Given,

credit sales for January = $330,500

credit sales for February = $486,000

credit sales for March = $680,400

credit sales for April = $583,200

The company’s past experience indicates that 70% of the accounts receivable are collected in the month of sale, 20% in the month following the sale, and 8% in the second month following the sale.

By keeping the company’s past experience in mind, we can anticipate cash inflow for the month of March is as follows

The anticipated cash inflow for the month of March = 8% of cash inflow from January + 20% of cash inflow from February + 70% of cash inflow from March

= ($330,500 X 8%) + ($486,000 X 20%) + ($680,400 X 70%)

= $26,440 + $97,200 + $476,280

= $599,920

The anticipated cash inflow for the month of March is $599,920.

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