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In: Accounting

Question 4 Fresplanade Co. had the following historical collection pattern for its credit sales: 75% collected...

Question 4

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

75% collected in the month of sale
12% collected in the first month after month of sale
9% collected in the second month after month of sale
3% collected in the third month after month of sale
1% uncollectible

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

July $ 90,000
August $ 102,000
September $ 114,000
October $ 126,000
November $ 138,000
December $ 120,000

The estimated total cash collections by Fresplanade Co. during November from collection of accounts receivable is:

Multiple Choice

  • $131,940.

  • $120,060.

  • $177,300.

  • $154,800.

  • $121,320.

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

75% collected in the month of sale
12% collected in the first month after month of sale
8% collected in the second month after month of sale
4% collected in the third month after month of sale
1% uncollectible

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

July $ 87,000
August $ 99,000
September $ 111,000
October $ 123,000
November $ 135,000
December $ 117,000

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

Multiple Choice

  • $98,850.

  • $94,380.

  • $102,090.

  • $65,250.

  • $84,690.

Solutions

Expert Solution

November Sales Collection:
November Sales (138000*75%)          103,500
October Sales (126000*12%)            15,120
September Sales (114000*9%)            10,260
August Sales (102000*3%)              3,060
Total Collection          131,940
Answer is 131940/-
August Sales Collection:
August Sales (99000*75%)            74,250
July Sales(87000*12%)            10,440
Total Collection            84,690
Answer is 84690/-

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