50 days after it pays its bills 274 Tutorial Question 275 8 9 Cash Collections

# 50 days after it pays its bills 274 tutorial question

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The firm is receiving cash on average 38.50 days after it pays its bills. 27.4 Tutorial Question 27.5, 8, 9 Cash Collections and Payments 27.5 a. A 45−day collection period implies all receivables outstanding from the previous quarter are collected in the current quarter, and: (90 45)/90 = 1/2 of current sales are collected. So: Q1 Q2 Q3 Q4 Beginning receivables \$275.00 \$350.00 \$315.00 \$405.00 Sales 700.00 630.00 810.00 930.00 Cash collections 625.00 665.00 720.00 870.00 Ending receivables \$350.00 \$315.00 \$405.00 \$465.00 b. A 60−day collection period implies all receivables outstanding from the previous quarter are collected in the current quarter, and: (90−60)/90 = 1/3 of current sales are collected. So: Q1 Q2 Q3 Q4 Beginning receivables \$275.00 \$466.67 \$420.00 \$540.00 Sales 700.00 630.00 810.00 930.00 Cash collections 508.33 676.67 690.00 850.00 Ending receivables \$466.67 \$420.00 \$540.00 \$620.00

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