ECQ Company marks up all merchandise at 25% of gross purchase.All purchases are made on account with terms of 1/10, net/60.Purchase discounts which are recorded as miscellaneous income, are always taken.Normally, 60% of each month's purchases are paid for in the month of purchase while the other 40% are paid during the first 10 days of the first month after purchase.Inventories of merchandise at the end of each month are kept at 30% of the next month's projected cost of goods sold.

Terms o sales on account are 2/10, net/30.Cash sales are not subject to discount.Fifty percent of each month's sales on account are collected during the month of sale, 45% are collected in the succeeding month and the remainder are usually uncollectible.Seventy percent of the collections in the month of sale are subject to discount while 10% of the collections in the succeeding month are subject to discount.

Projected sales data for selected months follow:

Cash salesSales on Account Gross

December200,000950,000

January125,000750,000

February175,000850,000

March150,000800,000