Coyote Loco, Inc., a distributor of salsa, has the following historical collection pattern for its credit sales.
80 percent collected in the month of sale.
10 percent collected in the first month after sale.
5 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 $126,500
July 154,000
August 179,000
September 208,000
October 233,000
November 258,000
December 220,500
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.

2. The estimated total cash collections during the fourth quarter of the year from sales made only on account during the fourth quarter are $835,870 ($166,400 + $207,200 + $240,100 + $222,170).

Data and Calculations:

Cash Collections from Credit Sales

June Jul Aug Sept Oct. Nov. Dec.

Credit Sales:

$126,500 $ 154,000 $179,000 $208,000 $233,000 $258,000 $220,500

Cash Collections:

80% $166,400 $186,400 $206,400 $176,400

10% 17,900 20,800 23,300 25,800

5% 7,700 8,950 10,400 11,650

4% 5,060 6,160 7,160 8,320

Total collections $222,310

June Jul Aug Sept Oct. Nov. Dec.

Credit Sales:

$126,500 $ 154,000 $179,000 $208,000 $233,000 $258,000 $220,500

Cash Collections:

80% $166,400 $186,400 $206,400 $176,400

10% 20,800 23,300 25,800

5% 10,400 11,650

4% 8,320

Total collections $166,400 $207,200 $240,100 $222,170

Thus, cash collections in October alone are $222,310 while for the fourth quarter based on fourth quarter credit sales only are $835,870.

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