Question

17. Duck-n-Run has projected sales of $120,000 for January, $118,000 for February, and $146,000 for March. The firm collects 55 percent in the month of sale, 43 percent in the month after sale, and 2 percent two months after sale. The accounts receivable balance at the end of the previous quarter was $27,000 of which $22,000 was uncollected December sales. What is the amount of the January collections?

Answer 1

Answer:

$92,022

Explanation:

The computation of the Jan collections is shown below:

Given that

Accounts Receivable = $27,000

Uncollected December Sales = $22,000

So, Uncollected November Sales = $5,000

For determining the amount of Jan collections we need to do following calculations which is

December Sales = Uncollected December Sales ÷ 0.45

= $22,000 ÷ 0.45

= $48,889

And,

Collection from November Sales = $5,000

Collection from December Sales = $48,889 × 43%

= $21,022

And,

Collection from January Sales = $120,000 × 55%

= $66,000

So,

Total Collection in January = Collection from November Sales + Collection from December Sales + Collection from January Sales

= $5,000 + $21,022 + $66,000

= $92,022

We simply added the three months collections