Sales on account for the first two months of the current year are budgeted as fo

Question

Sales on account for the first two months of the current year are budgeted as follows:


Jan. $ 700,000
Feb. 750,000

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All sales are made on terms of 2/10, n/30 (2% 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 %

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Compute the estimated cash collections on accounts receivable for the month of February. (Omit the "$" sign in your response.)

Estimated cash collections $____

Explanation / Answer

Sales in January: $700,000 Sales in February:$750,000 ------------------------------------------------------------------------------Receivables --------------------------------------------------------------------January-----------February Within discount period: 60% of $700,000: $420,000 Less 2% discount: ---------------------------- $ 8,400------ $411,600 After discount period: 15% of $700,000: ------------------ $105,000 Receivables of January:--------------------------------------$516,600 January sales receivables in February Within discount period: 15% of $700,000: $105,000 Less 2% discount: ---------------------------- $ 2,100--------------------------- $102,900 After discount period: 7% of $700,000: ------------------------------------------$ 49,000 February sales receivable in February: Within discount period: 60% of $750,000:$ 450,000 Less 2% discount: --------------------------- $ 9,000------ --------------------- $441,000 After discount period: 15% of $750,000: ---------------------------------------- $112,500 Receivables of February:-----------------------------------------------------------$705,400

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