Bowden Company has furnished the following information: Forecast sales for 1st month$ 339267Forecast sales for 2nd month$ 427051 Cash sales = 20% of total salesCollection schedule of the sales on credit In month sold60 %In the next month40 % What are Bowden Company’s forecast total cash collections for the second month?
Question
Bowden Company has furnished the following information: Forecast sales for 1st month 427051 Cash sales = 20% of total salesCollection schedule of the sales on credit In month sold60 %In the next month40 % What are Bowden Company’s forecast total cash collections for the second month?
Solution
To calculate the total cash collections for the second month, we need to consider both the cash sales for the second month and the collections from credit sales of the first and second month.
Step 1: Calculate cash sales for the second month Cash sales = 20% of total sales So, Cash sales for the second month = 20% of 85,410.2
Step 2: Calculate the collections from credit sales Credit sales = total sales - cash sales
For the first month: Total sales = 339,267 = 339,267 - 271,413.6 Collection of these credit sales in the next month (second month) = 40% of 108,565.44
For the second month: Total sales = 85,410.2 (calculated in step 1) So, Credit sales for the second month = 85,410.2 = 341,640.8 = $204,984.48
Step 3: Sum up all the cash collections for the second month Total cash collections for the second month = Cash sales for the second month + Collection of first month's credit sales in the second month + Collection of second month's credit sales in the second month = 108,565.44 + 398,960.12
So, Bowden Company’s forecast total cash collections for the second month is $398,960.12.
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