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Practice Problem 29

The forecasted sales pertain to Risco, Inc.:

Month Sales
January $400,000
February 500,000
March 300,000
April 200,000

Collection pattern:
50 percent in month of sale
50 percent in month following the sale

Accounts Receivable (December 31) $70,000
Finished Goods Inventory (December 31) 80,000

The company has a selling price of $10 per unit and expects to maintain ending inventories equal to 20 percent of the next month's sales.

How much cash does Risco expect to collect in February?

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Solution Summary

The following solution shows calculations of expected cash collection during the month.

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