OfficeMart Inc. has “cash and carry” customers and credit customers. OfficeMart estimates that 25% of monthly sales are to cash customers

OfficeMart Inc. has “cash and carry” customers and credit customers. OfficeMart estimates that 25% of monthly sales are to cash customers, while the remaining sales are to credit customers. Of the credit customers, 30% pay their accounts in the month of sale, while the remaining 70% pay their accounts in the month following the month of sale. Projected sales for the next three months of 2014 are as follows:

October $58,000
November 65,000
December 72,000

The Accounts Receivable balance on September 30, 2014, was $35,000.

Prepare a schedule of cash collections from sales for October, November, and December.


Answer:


OFFICEMART INC.
Schedule of Collections from Sales
For the Three Months Ending December 31, 2014
October November December
Receipts from cash sales:
Cash sales (25% × current month’s sales) $14,500 $16,250 $18,000
September sales on account:
Collected in October (Accounts Receivable
balance) 35,000
October sales1 on account:
Collected in October ($43,500 × 30%) 13,050
Collected in November ($43,500 × 70%) 30,450
November sales2 on account:
Collected in November ($48,750 × 30%) 14,625
Collected in December ($48,750 × 70%) 34,125
December sales3 on account:
Collected in December ($54,000 × 30%) 16,200
$62,550 $61,325 $68,325
1 $58,000 × 75% = $43,500
2 $65,000 × 75% = $48,750
3 $72,000 × 75% = $54,000