Management at Break Corp. expects an Accounting Receivable collection pattern of

Question

Management at Break Corp. expects an Accounting Receivable collection pattern of 80 percent in the month of sale, 15 percent in the month after sale, and 5 percent in the second month after sale. All sales are on credit and Breaker Corp. has rarely had any uncollectible Accounts Receivable. Actual sales for the last two months of 2009, and budgeted sales for the first quarter of 2010 follow:

November December January February March
2009 2009 2010 2010 2010
$680,000 $925,000 $864,000 $732,000 $788,000

Prepare Breaker Corp.

Explanation / Answer

Breaker Corp.’s cash collections budget for the first quarter of 2010 : budgeted sales : 864,000+732000+788000 = $2 ,384,000 account recivables : 15% of 2 ,384,000 = $357,600 cash flow = 0 as all sales are credit

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