Question

In: Accounting

Fresplanade Co. had the following historical collection pattern for its credit sales: 70% collected in the...

Fresplanade Co. had the following historical collection pattern for its credit sales:

70% collected in the month of sale
14% collected in the first month after month of sale
8% collected in the second month after month of sale
6% collected in the third month after month of sale
2% uncollectible

The sales on open account (credit sales) have been budgeted for the last six months of the year as shown below:

July $ 84,000
August $ 96,000
September $ 108,000
October $ 120,000
November $ 132,000
December $ 114,000

The estimated cash collection by Fresplanade Co. during August from July and August credit sales is:

Solutions

Expert Solution

Cash collection by Fresplanade Co. during August from July and August credit sales is = $78960

Working:

Expected cash collection budget
July August  
Sales   $           84,000.00 $           96,000.00
Schedule of expected cash collection  
July sales  

$           58,800.00

(84000*70%)

$           11,760.00

(84000*14%)

August sales  

$           67,200.00

(96000*70%)

Total cash collection   $           58,800.00 $           78,960.00

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