A company's past experience indicates that 60% of its credit sales are collected in the month of sale, 30% in the next month, and 5% in the second month after the sale; the remainder is never collected

Accounting Dec 14, 2020

A company's past experience indicates that 60% of its credit sales are collected in the month of sale, 30% in the next month, and 5% in the second month after the sale; the remainder is never collected. Budgeted credit sales were:
January $330000
February 186000
March 510000
The cash inflow in the month of March is expected to be
$378300
$267300
$306000
$361800

Expert Solution

Collection from January sales= January credit sales* 5%

= 330000* 5%

= 16500

Collection from February sales= February credit sales* 30%

= 186000* 30%

= 55800

Collection from March sales= March credit sales* 60%

= 510000* 60%

= 306000

Total collection in the month of March= Collection from January sales+ Collection from February sales+ Collection from March sales

= 16500+ 55800+ 306000

= 378300

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