Question

Carmen’s Dress Delivery operates a mail-order business that sells clothes designed for frequent travelers. It had sales of $400,000 in December. Because Carmen’s Dress Delivery is in the mail-order business, all sales are made on account. The company expects a 30 percent drop in sales for January. The balance in the Accounts Receivable account on December 31 was $60,000 and is budgeted to be $41,000 as of January 31.

Required

1. Determine the amount of cash Carmen’s Dress Delivery expects to collect from accounts receivable during January.

Answer 1

SOLUTION:

From given data,

Carmen’s Dress Delivery operates a mail-order business that sells clothes designed for frequent travelers. It had sales of $400,000 in December.

The company expects a 30 percent drop in sales for January.

The balance in the Accounts Receivable account on December 31 was $60,000 and is budgeted to be $41,000 as of January 31.

(a)Determine the amount of cash Carmen’s Dress Delivery expects to collect from accounts receivable during January.

Credit sales for January =660000*(100-27%) =$481800  

Add: Beginning Accounts Receivable = $60,000

Total Accounts Receivable for January = $481800 +$60,000

= $481860

Less: Estimated Ending Accounts Receivable = $ 41,000

Estimated Cash Collection for January =  $ 481860-$ 41000

=$ 481819

The amount of cash Carmen’s Dress Delivery expects to collect from accounts receivable during January is  $ 481819.