Question
Calculate second-quarter cash collections from sales for a company that expects to have credit sales of $200,000 in quarter 1 and $300,000 in quarter 2,
Calculate second-quarter cash collections from sales for a company that expects to have credit sales of $200,000 in quarter 1 and $300,000 in quarter 2, and collects 75% in the quarter of sale and the remaining 25% in the following quarter. A schedule of expected cash collections, such as the one that appears in Schedule 1 for Patterson Framing, is prepared after the sales budget. This schedule will be needed later to prepare the cash budget. Cash collections consist of collections on sales made to customers in prior periods plus collections on sales made in the current budget period. At Patterson Framing, experience has shown that 60% of sales is collected in the quarter in which the sale is made and the remaining 40% is collected in the following quarter. So, for example, 60% of the first-quarter sales of $600,000 (or $360,000) is collected during the first quarter and 40% (or $240,000) is collected during the second quarter.
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