The pattern for credit receivables collections are 60% month of sale, 30% month after sale and 10%second month after sale. What are the forecasted cash collections for the month of June

$269,750

The complete question

A company has projected the following sales for the spring quarter of 2014:

April $200,000

May $250,000

June $275,000

65% of all sales are paid for with cash. The remainder is on credit.

The pattern for credit receivables collections are:

The Month of Sale 60%

Month After-Sale 30%

Second Month After-Sale 10%

What are the forecast cash collections for the Month of June?

Explanation:

Cash collection for June will include

65% cash payment for June sales

=65% of  $275,000

=65/100 x $275,000

=0.65 x 275,000

=$178,750

cash sales =$178,750

Credit sales

credit collection from June sales:

65% was sold cash, meaning 35% was sold on credit.

35% of 275,000 = 35/100 x 275,000

=0.35 x 275,000

=96,250

cash collection for credit sales for June

=60% of 96,250

=0.6 x 96,250

=$57,750

May sales

65% of $250,000 was paid cash

35% was on credit.

35% of $250,000

=35/100 x 250,000

=$87,500

cash collection for may credit sales

=30% of 87,500 was paid in June

=0.3 x 87,500

=$26,250

From April sales

65% of sales were cash and 35% of credit

35$ of$200,000 was credit

=0.35 x $200,000

=$70,000

10% was paid in June

=10/100x $70,000

=0.1 x $70,000

=7,000

Total cash collection for June

=$178,750 + $57,750 +$26,250 + 7,000

=$269,750

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