Zinc, Inc. allows its customers a 2% discount if they pay cash and otherwise allows 30 days credit. 15% of their customers take the discount and pay in the month of purchase. The remainder pay in the month following purchase. Sales in October are $25,000 and sales for November are projected to be $30,000. Calculate cash inflows for November.

Question

Quizplus · Accepted Answer

For November cash inflows, we consider October sales (for those who pay in the following month) and November sales (for those who pay in the month of purchase taking the discount). October sales: $25,000 (85% pay in November) = $25,000 * 0.85 = $21,250. November sales: $30,000 (15% pay in November taking a 2% discount) = $30,000 * 0.15 * 0.98 = $4,410. Total cash inflows for November = $21,250 (October sales paid in November) + $4,410 (November sales paid in November with discount) = $25,660.

Zinc, Inc Allows Its Customers a 2% Discount If They Pay