Budgeted sales for the first quarter of the year for the Delta Company are as fo

Question

Budgeted sales for the first quarter of the year for the Delta Company are as follows:
Budgeted Sales
January $400,000
February 200,000
March 600,000
The Company normally collects 60% in the month of sale and 30% in the month following the sale. Ten percent of all sales are uncollectible and are written off in the following month.
The balance in accounts receivable at January 1 was $100,000, which represents 40% of December sales.
Prepare a schedule of cash collections for the first three months of the year.

Explanation / Answer

40 % of december sales =100,000 december sale = 100,00*(100/40) =$ 250,000 now for the month of january collection = 0.60*400,000 + 0.30 *250,000 = $315,000 uncollectible = 0.10*250,000 =$ 25,000 for february month collection = 0.60*200,00 +0.30*400,000 =$240,000 uncollectible = 0.10*400,000 =$40,000 for march month collection = 0.60*600,000 +0.30*200,000 = $420,000 uncollectible =0.10*200,000 =$20,000 month collection uncollectible january $315,000 $25,000 february $240,000 $40,000 march $420,000 $20,000

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