Harris Electronics bills its clients on the first of the month
For example, any sale made in the month of July is billed August 1 and is due September 1. Clients traditionally pay as follows: 50% by the end of the first month (August), 40% by the end of the second month (September), 8% by the end of the third month (October), and 2% default on their bills. The firm's CEO wants to know the anticipated cash flow for April. Use the following information to estimate April cash flows.
A) $96,000
B) $77,600
C) $84,640
D) $99,000
Answer: C
Explanation: C) April cash flows = (0.50) × March sales + (0.40) × February sales + (0.08) × January sales = 0.50 × $96,000 + 0.40 × $74,000 + 0.08 × $88,000 = $84,640.
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