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Sales on account for the first two months of the current year are budgeted as follows.
January $ 966,000
February 650,000
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.

Sagot :

Answer:

Total cash collections $689,322

Explanation:

The computation of the estimated cash collections on account receivable is shown below;

January Sales within the discount period ($966,000  × 15% × 98%) $142,002

January Sales after the discount period ($966,000  × 7%) $67,620

February Sales within the discount period ($650,000  × 60% × 98%) $382,200

February Sales after the discount period  ($650,000  × 15%) $97,500

Total cash collections $689,322

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