Question

Flatiron Corp has the following budgeted sales in each quarter of the year 2020:

Expected Sales

Q1 $ 300,000

Q2 $ 320,000

Q3 $ 340,000

Q4 $ 360,000

Cash collection information are as follows:

1. Of all sales, 80% are on credit.

2. For the credit sales made in the year 2020; 60% of credit sales are collected in the quarter in which the sale is made; 30% are collected in the following quarter; and 10% are collected in the second quarter after sale.

3. Accounts Receivable is estimated to be $60,000 on December 31,2019. The company expects to collect all outstanding receivable in the first quarter of 2020.

What is the total cash collection for the first quarter of 2020?

Answer 1

Given Information,

Q1 Expencted Sales is $ 3,00,000

Sales pattern is as follows:

80% on credit, other way 20% on cash.

For Credit Sales Collection:

60% Collected in Same Quarter in which sale is made

30% Collected in following Quarter

10% are collected in the second quarter after sale

The company expects to collect all outstanding receivable i.e $ 60,000 in the first quarter of 2020

Expected Total Sale Quarter 1	Cash Sale	Cash Sale	Credit Sale	Credit Sale
$                                         3,00,000	20%	$ 60,000	80%	$ 2,40,000

Total Cash Collection for the First Quarter of 2020 is as follows:

Particular	Amount
Cash Sales (20% of Q1 Sales)	$     60,000
60% of Q1 Credit Sale ( $ 2,40,000*60%)	$ 1,44,000
Outstanding accounts receivable	$     60,000
Total Cash Collection for the Q1	$ 2,64,000

Thus, Total Cash Collection for the First Quarter of 2020 is $ 2,64,000