LeMinton Company expects the following credit sales for the first five months of the year: January, $25,000; February, $40,000; March, $30,000; April, $36,000, May $40,000. Experience has shown that payment for the credit sales is received as follows: 60% in the month of sale, 25% in the first month after sale, 12% in the second month after sale, and the remainder is uncollectible. How much cash can LeMinton Company expect to collect in March as a result of credit sales (current and past)?
What will be an ideal response?
$31,000
Estimated collections in March = Estimated collections from credit sales in March + Estimated collections in March from credit sales made in February + Estimated collections in March from credit sales made in January = ($30,000 × 0.6) + ($40,000 × 0.25) + ($25,000 × 0.12) = $18,000 + $10,000 + $3,000 = $31,000.
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