Question

Spencer Consulting invoices its clients on terms 2/10, n/30. In May and June, the credit sales were 150,000 and170,000, 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): receiving discount beyond discount period totals in month of sale 50. What is the total amount of cash collections for May and June?

Answer 1

The total amount of cash collections for May and June would be $160,000.

Step-by-step explanation:

To calculate the total amount of cash collections for May and June, we need to consider the customers' payment patterns.

In May, the total credit sales were $150,000. 50% of this amount was received beyond the discount period, which means no discount was applied and the full amount was collected. Therefore, the cash collections for May would be $150,000 - ($150,000 x 50%) = $150,000 - $75,000 = $75,000.

In June, the total credit sales were $170,000. Again, 50% of this amount was received beyond the discount period, resulting in no discount and full cash collection. Therefore, the cash collections for June would be $170,000 - ($170,000 x 50%) = $170,000 - $85,000 = $85,000.

The total amount of cash collections for May and June would be $75,000 (May) + $85,000 (June) = $160,000.