Question

Fender Manufacturing Company needs to know its anticipated cash inflows for the next quarter by month. Cash sales are 10% of total sales each month. Historically, sales on account have been collected as follows: 50% in the month of the sale, 35% in the month after the sale, and the remaining 15% two months after the sale. Sales for the quarter are projected as follows:

January: $60,000
February: $30,000:
March: $90,000.

Accounts receivable on December 31 were $45,000. The expected cash collections of Fender Manufacturing Company for March are:_________

Answer 1

Fender Manufacturing Company

The expected cash collections of Fender Manufacturing Company for March is:

= $58,050

Step-by-step explanation:

a) Data and Calculations:

Cash sales = 10% of total sales

Credit sales = 90% (100% - 10%)

Cash collections from credit sales:

Month of the sale (50%)

Month after the sale (35%)

Two months after (15%)

Accounts receivable on December 31 = $45,000

January February March

Projected sales $60,000 $30,000 $90,000

Cash sales $6,000 $3,000 $9,000

Credit sales $54,000 $27,000 $81,000

Cash collections from credit sales:

Month of the sale (50%) $27,000 $13,500 $40,500

Month after the sale (35%) 31,500 18,900 9,450

Two months after (15%) 13,500 8,100

Cash collections from credit sales $58,050

The expected cash collections of Fender Manufacturing Company for March =

Cash collections from credit sales $58,050

Cash sales 9,000

Total cash receipts for the month $67,050