Question: KD Insurance Company specializes in term life insurance contracts. Cash collection experience shows that 20 percent of billed premiums are collected in the month before
KD Insurance Company specializes in term life insurance contracts. Cash collection experience shows that 20 percent of billed premiums are collected in the month before they are due, 60 percent are paid in the month in which they are due, and 16 percent are paid in the month following their due date. Four percent of the billed premiums are paid late (in the second month following their due date) and include a 10 percent penalty payment. Total billing notices in January were $58,000; in February, $62,000; in March, $66,000; in April, $65,000; in May, $60,000; and in June, $62,000. How much cash does the company expect to collect in May?
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