Suppose that a company has the following accounts receivable collection pattern: Paid in the month of sale 30%
Paid in the month following sale 70%
All sales are on credit. Suppose credit sales for March and April are $300,000 and $200,000, respectively. What would be the company's cash collection for April?

Question

Quizplus · Accepted Answer

The cash collection for April would consist of 30% of the credit sales made in April which is $0 (as the question doesn't mention any credit sales in April). However, the cash collection for credit sales made in March would be 30% ($90,000) which would be paid in the month of sale and 70% ($210,000) which would be paid in the following month, i.e. April. 
Therefore, the cash collection for April would be $270,000 ($90,000 collected in March plus $210,000 collected in April).

Suppose That a Company Has the Following Accounts Receivable Collection