Excercise 1- Determining cash receipts from accounts receivable Janice\'s Dress
ID: 2588290 • Letter: E
Question
Excercise 1- Determining cash receipts from accounts receivable
Janice's Dress Delivery operates a mail-order business that sells clothes designed for frequent travelers. It had sales of $560,000 in December. Because Janice's Dress Delivery is in the mail-order business, all sales are made on account. The company expects a 30 percent drop in sales for January. The balance in the Accounts Receivable account on December 31 was $96,400 and is budgeted to be $73,600 as of January 31. Janice's Dress Delivery normally collects accounts receivable in the month following the month of sale.
Required
a. Determine the amount of cash Janice's Dress Delivery expects to collect from accounts receivable during January.
b. Is it reasonable to assume that sales will decline in January for this type of business? Why or why not?
Explanation / Answer
a.
Budgeted January sales = 560,000 x 70% = $392,000
b. No, it is not reasonable to assume that sales will decline in january for this type of business. Because they sale to frequent travelers.
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January cash collections Particulars Amount Calculate December credit sales $ 96,400 January credit sales $ 318,400 392,000 - 73,600 Total January cash collections $ 414,800Related Questions
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