A companys past experience indicates that 60 of its credit...

A company's past experience indicates that 60% of its credit sales are collected in the month of sale, 30% in the next month, and 5% in the second month after the sale; the remainder is never collected. Budgeted credit sales were: January $370,000, February $226,000, March $550,000. The cash inflow in the month of March is expected to be

Transcript

00:01 We need to make a table to break out what the accounts receivable balances will be for each month.

00:10 So let's start by writing month, and we'll write january, february, and march.

00:23 And then we have sales, and then we have, let's see, 60%, which is current.

00:36 So that's what it's collected in the current month.

00:41 30%, which is collected in the next month, and 5%, which is collected in the second month.

00:55 So from here, actually, let me write these a little bit lower.

01:07 And then there's 5 % that's uncollectable, and it doesn't really need to be included in this calculation.

01:15 So for january, we're told that expected sales is $370 ,000.

01:21 60 % of that is going to be collected in january, the current month, and that's 220 ,000.

01:30 And then 30 % is collected in the next month, so that's 111 ,000.

01:37 And 5 % is collected in the second month after.

01:40 So that would be march, and that's 18 ,500.

01:44 So i'm going to do the same thing for february and march.

01:48 226 ,000 is collected or sorry is what the expected sales will be 60 % of that is 135 ,600, and that they expect to collect in february.

02:03 And then the next month, they expect to collect 30%, which would be in march, and then 11 % or 5%, which is 11 ,300 would be collected in april.

02:14 And then march is 550 ,000 in sales.

02:21 60 % would be collected.

02:24 So 330 ,000.

02:28 And that would be collected in march...

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