Question

In the month of January, Memorial Hospital provided $270,000 in services. If the hospital has a pattern of debt collections of 20% collected in the first month, 30% collected in the second month, 25% collected in the third month, 15% collected in the fourth month, 5% collected in the fifth month, and 5% written off as bad debt in the sixth month, at the end of March (3 months out), how much money will Memorial Hospital have collected?

Answer 1

Solution:

The total amount collected at the end of march = Amount collected in the month of January + Amount collected in the month of February + Amount collected in the month of March

As per the information given in the question

Amount of Services provided = $ 270,000

(a)

20 % of the Debt collection are made in the First Month. This implies that 20 % of the Debt collection are made in January.

Thus collection made in the month of January = 20 % * Amount of Services provided

= 20 % * $ 270,000 = $ 54,000

(b)

30 % of the Debt collection are made in the Second Month. This implies that 30 % of the Debt collection are made in February.

Thus collection made in the month of February = 30 % * Amount of Services provided

= 30 % * $ 270,000 = $ 81,000

(c )

25 % of the Debt collection are made in the Third Month. This implies that 25 % of the Debt collection are made in March

Thus collection made in the month of March = 25 % * Amount of Services provided

= 25 % * $ 270,000 = $ 67,500

The total amount collected by Memorial Hospital at the end of march = $ 54,000 + $ 81,000 + $ 67,500

= $ 202,500