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Question - Ridenour Ltd. is preparing its first-quarter monthly cash budget for 2011. The following information is available about actual 2010 sales and expected 2011 sales:
Tracing collections from prior year monthly sales and discussions with the credit manager helped develop a profile of collection behavior Patterns. Of a given month's sales, 40 percent is typically collected in the month of sale. Because the company terms are 1 percent (end of month) net 30, all collections within the month of sale are net of the 1 percent discount. Of a given month sales,30 Percent is collected in the month following the sale. The remaining 30 percent is collected in the second month following the month of the sale. Bad debts are negligible and should be ignored.
a. Help create schedule of cash collections for Ridenour Ltd. for January, February, and March 2011.
b. Calculate the Accounts Receivable balance at March 37, 2077.