Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 44

Accounts Receivable Collections Esplanade Company’s credit sales have the following historical pattern:

70 percent collected in the month of sale 15 percent collected in the first month after month of sale 10 percent collected in the second month after month of sale 4 percent collected in the third month after month of sale 1 percent uncollectible

The following sales on open account (credit sales) have been budgeted for the last six months in 2010:

July	$60,000	October	90,000
August	70,000	November	100,000
September	80,000	December	85,000

Required

1. Determine the estimated total cash collections from accounts receivable during October 2010.

---

2. Compute the estimated total cash collections during the fourth quarter from credit sales of the fourth quarter.

 

Step 1 of 3

Accounts Receivable Collections period:

The comparison between receivables and sales activity of a business which is used to evaluate that how much time the customers will take to pay a company, is known as accounts receivable collections period.