Reference no: EM131739222

Question: Management estimates 5 percent of credit sales to be uncollectible. Of collectible credit sales, 60 percent is collected in the month of sale and the remainder in the month following the month of sale. Purchases of inventory each month include 70 percent of the next month's projected total sales (stated at cost) plus 30% of projected sales for the current month (stated at cost). All inventory purchases are on account; 25 percent are paid in the month of purchase, and the remainder is paid in the month following the month of purchase. Purchase costs are approximately 60 percent of the selling price.