Question

Janice’s Dress Delivery operates a mail-order business that sells clothes designed for frequent travelers. It had sales of $560,000 in December. Because Janice’s Dress Delivery is in the mail-order business, all sales are made on account. The company expects a 30 percent drop in sales for January. The balance in the Accounts Receivable account on December 31 was $96,400 and is budgeted to be $73,600 as of January 31. Janice’s Dress Delivery normally collects accounts receivable in the month following the month of sale. Required: Determine the amount of cash Janice’s Dress Delivery expects to collect from accounts receivable during January.

Answer 1

Answer:

$414,800

Explanation:

First, calculate the sales revenue for January

Sales Budget

December = $560,000

January = ($560,000 × 0.70) = $392,000

Then, Prepare a Trade Receivables Schedule

Cash Trade Receivables Schedule

                                                                        January

Balance b/d                                                     $96,400

Add Credit Sales                                          $392,000

Less Balance c/d                                           ($73,600)

Cash Received from Trade Receivables     $414,800

Therefore, Dress Delivery expects to collect $414,800 from accounts receivable.