Budgeting Cash Collections Spencer Consulting, which invoices its clients on ter

Question

Budgeting Cash Collections Spencer Consulting, which invoices its clients on terms 2/10, n/30, had credit sales for May and June of $56,000 and $64,000, respectively. Analysis of Spencer's operations indicates that the pattern of customers' payments on account is as follows (percentages are of total monthly credit sales In month of sale in month of following sale Uncollectible accounts, returns, and allowances Receiving Discount 50% 15% Beyond Discount Period Totals 20% 70% 10% 25% 5% 100%: Determine the estimated cash collected on customers' accounts in June.

Explanation / Answer

CALCULATION OF THE CASH BUDGET MAY JUNE Sales 56000 64000 In month of Sales Receiving Discount 50 % $                            27,440 $                                   31,360 ($ 56,000 X 50% X 0.98) ($ 64,000 X 50% X 0.98) Beyond Discount period 20% $                            11,200 $                                   12,800 In the month of Following Sales $                                      8,232 Receiving Discount 15 % ($ 56,000 X 15% X 0.98) Beyond Discount Period 10% $                                      5,600 Uncollectable 5% 0 Total Receipt of the month of June $                                   57,992 Answer = Estimated collection in the month of June = $ 57,992

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