Question

Kaspar Industries expects credit sales for January, February, and March to be $220,000, $260,000, and $300,000, respectively. It is expected that 75% of the sales will be collected in the month of sale, and 25% will be collected in the following month.
Compute cash collections from customers for each month.

Collections from customers
Credit Sales January February March
January $ $ $
February
March
$ $ $

Answer 1

Answer:

January collections:

= 75% * January credit sales

= 75% * 220,000

= $165,000

February collections:

= (75% * February collections) + (25% * January collections)

= (75% * 260,000) + (25% * 220,000)

= $250,000

March collections:

= (75% of March collections) + (25% * February collections)

= (75% * 300,000) + (25% * 260,000)

= $290,000