Noterman Company has credit sales of 600000 in January Past

Noterman Company has credit sales of $600,000 in January. Past experience suggests that 40% is collected in the month of sale, 50% in the month following the sale, and 10% in the second month following the sale. Compute the cash collections from January sales in January, February, and March.

Solution

Noterman Company

Credit sales for January = 600,000

Collection in January 40% = 240,000

Collection in February 50% = 300,000

Collection in March 10% = 60,000

Thus for 600000 sales in January 40% of 600000 =240000 is collected in February and so on.