ABC Company expects the following sales and collection pattern for the last 4 months of the year. Month Cash Sales Credit Sales Total Sales September $25,000 $65,000 $90,000 October $28,000 $72,000 $100,000 November $26,000 $68,000 $94,000 December $30,000 $71,000 $101,000 • 5% of credit sales are collected in the same month. • 65% of sales are collected in the following month. • 25% of sales are collected in the second following month. What are the projected cash collections for the month of December?

Question

Linda

Business

18 October, 04:16

ABC Company expects the following sales and collection pattern for the last 4 months of the year. Month Cash Sales Credit Sales Total Sales September $25,000 $65,000 $90,000 October $28,000 $72,000 $100,000 November $26,000 $68,000 $94,000 December $30,000 $71,000 $101,000 • 5% of credit sales are collected in the same month. • 65% of sales are collected in the following month. • 25% of sales are collected in the second following month. What are the projected cash collections for the month of December?

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Answers (1)

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George Petty · Answer 1

The projected cash collections for the month of December is $ 65,750.

Explanation:

Projected cash flows for the month of December = 25% of october credit sales + 65% of November credit sales

5% of December credit sales

= (72000*25%) + (68000*65%) + (71000*5%)

= $ 65,750.

Total percentage as per given question, is only 95% but not 100%.

Also, credit sales collections upto second following month of Actual date of sale. So, september month sale is not considered.