Fender Manufacturing Company needs to know its anticipated cash inflows for the next quarter by month. Cash sales are 10% of total sales each month. Historically, sales on account have been collected as follows: 50% in the month of the sale, 35% in the month after the sale, and the remaining 15% two months after the sale. Sales for the quarter are projected as follows: January: $60,000
February: $30,000:
March: $90,000.

Accounts receivable on December 31 were $45,000. The expected cash collections of Fender Manufacturing Company for March are:

Fender Manufacturing Company

The expected cash collections of Fender Manufacturing Company for March is:

= $58,050

Explanation:

a) Data and Calculations:

Cash sales = 10% of total sales

Credit sales = 90% (100% - 10%)

Cash collections from credit sales:

Month of the sale (50%)

Month after the sale (35%)

Two months after (15%)

Accounts receivable on December 31 = $45,000

                                             January     February        March

Projected sales                   $60,000     $30,000     $90,000

Cash sales                            $6,000        $3,000       $9,000

Credit sales                        $54,000      $27,000      $81,000

Cash collections from credit sales:

Month of the sale (50%)   $27,000       $13,500     $40,500

Month after the sale (35%) 31,500          18,900         9,450

Two months after (15%)                           13,500          8,100

Cash collections from credit sales                         $58,050

The expected cash collections of Fender Manufacturing Company for March =

Cash collections from credit sales     $58,050

Cash sales                                               9,000

Total cash receipts for the month     $67,050

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