Harris Electronics bills its clients on the first of the month.For example,any sale made in the month of July is billed August 1 and is due September 1.Clients traditionally pay as follows: 50% by the end of the first month (August),40% by the end of the second month (September),8% by the end of the third month (October),and 2% default on their bills.The firm's CEO wants to know the anticipated cash flow for April.Use the following information to estimate April cash flows.
A)$96,000
B)$77,600
C)$84,640
D)$99,000

Question

Harris Electronics bills its clients on the first of the month.For example,any sale made in the month of July is billed August 1 and is due September 1.Clients traditionally pay as follows: 50% by the end of the first month (August),40% by the end of the second month (September),8% by the end of the third month (October),and 2% default on their bills.The firm's CEO wants to know the anticipated cash flow for April.Use the following information to estimate April cash flows. 
A)$96,000 
B)$77,600 
C)$84,640 
D)$99,000

Quizplus · Accepted Answer

To estimate the April cash flows, we need to consider the sales made in January, which are billed on February 1 and due on March 1. These sales are expected to be paid as follows:
- 50% by the end of February
- 40% by the end of March
- 8% by the end of April
- 2% default

Assuming all clients pay on time, we can estimate the cash flow for April as follows:
- 50% of January sales: $80,000
- 40% of January sales: $64,000
- 8% of January sales: $12,800
Total expected cash flow: $156,800

However, we need to take into account the default rate, which means that 2% of the sales may not be paid. This would result in a loss of $3,200. Therefore, the anticipated cash flow for April would be:
$156,800 - $3,200 = $153,600

Out of the given options, the closest one to $153,600 is C) $84,640. Therefore, the best choice is C.

Harris Electronics Bills Its Clients on the First of the Month.For