Exercise 9-24 Cash Collections (LO 9-3, 9-5) Coyote Loco, Inc., a distributor of

ID: 2589267 • Letter: E

Question

Exercise 9-24 Cash Collections (LO 9-3, 9-5) Coyote Loco, Inc., a distributor of salsa, has the following historical collection pattern for its credit sales 60 percent collected in the month of sale 20 percent collected in the first month after sale 15 percent collected in the second month after sale 4 percent collected in the third month after sale 1 percent uncollectible The sales on account have been budgeted for the last seven months as follows 127,000 154,500 179,500 June July August September 209,000 October November December 234,000 259,000 221,500 Required: 1. Compute the estimated total cash collections during October from credit sales 2. Compute the estimated total cash collections during the fourth quarter from sales made on account during the fourth quarter Total cash collections Total cash collections 2

Explanation / Answer

June

July

August

September

October

November

December

Sales on account

127000

154500

179500

209000

234000

259000

221500

Cash Collection:

60% Collection

127000*60%= 76200

154500*60% = 92700

179500*60% = 107700

209000*60% = 125400

234000*60% = 140400

259000*60% = 155400

221500*60% =

132900

20% Collection

127000*20%= 25400

154500*20%= 30900

179500*20% = 35900

209000*20% = 41800

234000*20% = 46800

259000*20% = 51800

15% Collection

127000*15%= 19050

154500*15% = 223175

179500*15% = 26925

209000*15% = 31350

234000*15% = 35100

4% Collection

127000*4%= 5080

154500*4% = 6180

179500*4% = 7180

209000*4% = 8360

TOTAL

76200

118100

157650

389555

215305

240730

228160