Cash collections Miriam Irby is president of MI Corp. Irby has decided to take a month's vaca- tion with her family to South Africa, Zimbabwe, and Angola. Irby has researched the trip and determined that the total cost of the trip for her family will be approximately $50,000. Her travel agent says that a 10 percent discount can be obtained if Irby can write a check for the cost of the trip by the end of November. Irby says she sees no problem in doing that given that the company's expected billings for October, November, and December, respectively, are $100,000, $65,000, and $15,000 (Irby will leave on vacation in December). As of September 30, MI Corp.'s accountant has estimated cash collections from billings to be 15 percent in the month of sale, 55 percent in the month following sale, and 30 percent in the second month following sale. The September 30 Accounts Receivable balance is $11,000; that amount is expected to be collected in October. Average monthly business costs are $22,500. a. What are MI Corp.'s expected cash collections for October, November, and December? b. Can Irby pay for her trip in November and obtain the 10 percent discount? Explain. c. What would you suggest that Irby do?
Cash collections Miriam Irby is president of MI Corp. Irby has decided to take a month's vaca- tion with her family to South Africa, Zimbabwe, and Angola. Irby has researched the trip and determined that the total cost of the trip for her family will be approximately $50,000. Her travel agent says that a 10 percent discount can be obtained if Irby can write a check for the cost of the trip by the end of November. Irby says she sees no problem in doing that given that the company's expected billings for October, November, and December, respectively, are $100,000, $65,000, and $15,000 (Irby will leave on vacation in December). As of September 30, MI Corp.'s accountant has estimated cash collections from billings to be 15 percent in the month of sale, 55 percent in the month following sale, and 30 percent in the second month following sale. The September 30 Accounts Receivable balance is $11,000; that amount is expected to be collected in October. Average monthly business costs are $22,500. a. What are MI Corp.'s expected cash collections for October, November, and December? b. Can Irby pay for her trip in November and obtain the 10 percent discount? Explain. c. What would you suggest that Irby do?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Cash collections Miriam Irby is president of MI
Corp. Irby has decided to take a month's vaca- tion
with her family to South Africa, Zimbabwe, and Angola.
Irby has researched the trip and determined that the
total cost of the trip for her family will be approximately
$50,000. Her travel agent says that a 10 percent
discount can be obtained if Irby can write a check for
the cost of the trip by the end of November. Irby says
she sees no problem in doing that given that the
company's expected billings for October, November,
and December, respectively, are $100,000, $65,000,
and $15,000 (Irby will leave on vacation in December).
As of September 30, MI Corp.'s accountant has
estimated cash collections from billings to be 15
percent in the month of sale, 55 percent in the month
following sale, and 30 percent in the second month
following sale. The September 30 Accounts Receivable
balance is $11,000; that amount is expected to be
collected in October. Average monthly business costs
are $22,500. a. What are MI Corp.'s expected cash
collections for October, November, and December? b.
Can Irby pay for her trip in November and obtain the 10
percent discount? Explain. c. What would you suggest
that Irby do?
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