Question

Sun company has studied the collection pattern of sales for the past year and management has developed the following collection schedule:
55 percent in the month of sale with a 1 percent discount
30 percent in the month of sale
15 percent in the second month following the sale
Actual sales for past six months are:
January $200,100
February 220,450
March 300,700
April 251,200
May 275,890
June 180,460
Expected sales for the next six months are:
July $175,800
August 194,500
September 186,300
October 210,750
November 349,000
December 375,900
A) Determine the expected cash receipts by the month for July through September
B) Determine the expected cash discounts by month for July through September
C) Determine the expected ending balance of accounts receivable by the month of July through September

Answer 1

A) The determination of the expected cash receipts from July to September is as follows:

                                          July            Aug.          Sept.  

Expected Sales             $175,800    $194,500    $186,300

Cash (55%)                       96,690      106,975     102,465

1% discount                           967          1,070          1,025

Net cash sales                 95,723      105,905      101,440

30% month 1                    52,740       58,350       55,890

15% month 2                   27,069        26,370        29,175

Total cash receipts   $175,532   $190,625   $186,505

B) The determination of the expected cash discounts from July to September is as follows:

                                             July            Aug.          Sept.  

Expected Sales             $175,800    $194,500    $186,300

Cash (55%)                       96,690      106,975     102,465

1% Cash Discounts            $967        $1,070      $1,025

C) The determination of the expected ending balance of accounts receivable from July to September is as follows:

                                             July            Aug.            Sept.

Expected Sales              $175,800     $194,500    $186,300

Ending balance of

 Accounts Receivable  $26,370      $29,175    $ 27,945

= 15% of July, August, and September Sales

Data and Calculations:

                         July            Aug.         Sept.          Oct.          Nov.            Dec.

Expected

 Sales           $175,800  $194,500   $186,300   $210,750   $349,000  $375,900

Cash (55%)      96,690    106,975     102,465      115,913      191,950    206,745

1% discount           967        1,070          1,025         1,159          1,920        2,067

Net cash sales 95,723   105,905      101,440     114,754     190,030    204,678

30% month 1    52,740     58,350      55,890     63,225     104,700      112,770

15% month 2   27,069      26,370       29,175     27,945        31,613      52,350

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