Firefly Manufacturing Company needs to know its anticipated cash inflows for the

Question

Firefly Manufacturing Company needs to know its anticipated cash inflows for the next quarter by month. Cash sales are 20 percent of total sales each month. Historically, sales on account have been collected as follows: 50 percent in the month of the sale, 35 percent in the month after the sale, and the remaining 15 percent two months after the sale. Sales for the quarter are projected as follows: January, $60,000; February, $30,000; and March, $90,000.

Accounts receivable on December 31 were $45,000.

The expected cash collections of Firefly Manufacturing Company for March are

Explanation / Answer

December January February . AR/ Sales 45000 60000 30000 90000 Cash Collection 20% of Sales 12000 6000        18,000 90000*20% 50% on account in the same month 24000 12000        36,000 35% in the next month of Sales of December 31500 35% in the next month of Sales of January 16800 15% in the next month of Sales of December 13500 15% in the next month of Sales of January           7,200 (48000*15%) 35% in the next month of Sales of February           8,400 (24000*35%) Collection in March        69,600

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