Question 2 (of 7) value: 4.00 points Laura\'s Dress Delivery operates a mail-ord

Question

Question 2 (of 7) value: 4.00 points Laura's Dress Delivery operates a mail-order business that sells clothes designed for frequent travelers. It had sales of $620,000 in December. Because Laura's Dress Delivery is in the mail-order business, all sales are made on account. The company expects a 26 percent drop in sales for January. The balance in the Accounts Receivable account on December 31 was $97,900 and is budgeted to be $72,600 as of January 31. Laura's Dress Delivery normally collects accounts receivable in the month following the month of sale. Required a. Determine the amount of cash Laura's Dress Delivery expects to collect from accounts receivable during January. Expected cash collection References eBook &Resources;

Explanation / Answer

December Sales = $620,000

January sales is expected to drop by 26%

January Sales = $620,000 * (1 - 0.26)
January Sales = $458,800

Expected Accounts Receivable on January 31 = $72,600
Expected Accounts Receivable on December 31 = $97,900

Expected Cash Collection = Expected Accounts Receivable on December 31 + January Sales - Expected Accounts Receivable on January 31
Expected Cash Collection = $97,900 + $458,000 - $72,600
Expected Cash Collection = $483,300December Sales = $620,000

January sales is expected to drop by 26%

January Sales = $620,000 * (1 - 0.26)
January Sales = $458,800

Expected Accounts Receivable on January 31 = $72,600
Expected Accounts Receivable on December 31 = $97,900

Expected Cash Collection = Expected Accounts Receivable on December 31 + January Sales - Expected Accounts Receivable on January 31
Expected Cash Collection = $97,900 + $458,000 - $72,600
Expected Cash Collection = $483,300

So, amount of cash Laura's Dress Delivery expects to collect from accounts receivable during January is $483,300

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