Budgeting Cash Collections Lowell Consulting, which sells on terms 2/10, n/30, had credit sales for March and April of $60,000 and $50,000, respectively. Analysis of Lowell's operations indicates that the pattern of customers' payments on account is as follows (percentages are of total monthly credit sales):
|Receiving Discount||Beyond Discount Period||Totals|
|In month of sale||40%||20%||60%|
|In month following sale||15%||20%||35%|
|Uncollectible accounts,returns, and allowances||5%|
Determine the estimated cash collected on customers' accounts in April.
Cash Collection Schedule:
Cash collection schedule is prepared for cash sales and credit sales. The expected cash collection from the current period sale and previous period sales are added together to find the net cash collection for the period. Any discount allowed is deducted from the cash collection amount.
Answer and Explanation:
The estimated cash collected on customers' accounts in April is $50,420
The estimated cash collected on customers' accounts in April is $50,420 ($50,000 x 40% x 98% + $50,000 x 20% + $60,000 x 15% x 98% + $60,000 x 20%), which is the sum of cash collected for April and March sale.
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from Finance 101: Principles of FinanceChapter 18 / Lesson 3