Question

Coyote Loco, Inc., a distributor of salsa, has the following historical collection pattern for its credit sales.
70 percent collected in the month of sale.
15 percent collected in the first month after sale.
10 percent collected in the second month after sale.
4 percent collected in the third month after sale.
1 percent uncollectible.
The sales on account have been budgeted for the last seven months as follows:
June...........................................................$122,500
July............................................................ 150,000
August....................................................... 175,000
September.................................................. 200,000
October...................................................... 225,000
November.................................................. 250,000
December.............................................212,500

Required:
1. Compute the estimated total cash collections during October from credit sales.
2. Compute the estimated total cash collections during the fourth quarter from sales made on account during the fourth quarter.
3. Construct an Excel spreadsheet to solve both of the preceding requirements. Show how the solution will change if the following information changes: sales in June and July were $ 100,000 and $ 130,000, respectively.
(CMA, adapted)



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  • CreatedApril 22, 2014
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