5th Edition

ISBN: 9781259631122

Author: Edmonds, Thomas P.

Publisher: Mcgraw-hill Education,

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Textbook Question

Chapter 14, Problem 5E

Exercise 7-5A Determining cash receipts from accounts receivable

Carmen’s Dress Delivery operates a mail-order business that sells clothes designed for frequent travelers. It had sales of $400,000 in December. Because Carmen’s Dress Delivery is in the mail-order business, all sales are made on account. The company expects a 30 percent drop in sales for January. The balance in the Accounts Receivable account on December 31 was $60,000 and is budgeted to be $41,000 as of January 31.

Required

a. Determine the amount of cash Carmen’s Dress Delivery expects to collect from accounts receivable during January.

b. Is it reasonable to assume that sales will decline in January for this type of business? Why or why not?

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