Problem 9-65 (Aragon and Associates)

Aragon has developed the following forecast of fees:

May $180.000
June 200.000
July 190.000
August 194.000
September 240.000

- 10% of fees are collected in the month that service is rendered

- 60% of fees are collected in the month following service
- 26% of fees are collected in the second month following service
- 4% of fees are never collected
- 3% late charge for fee that have not been paid until the second month

Aragon and Associates

Schedule of Expected Cash Collections
Month
May June July August September
From May sales:
10% x $180.000 18.000
60% x $180.000 108.000
26% x $180.000 46.800
late charge [3% x (180.000 - 18.000 216
- 108.000 - 46.800)]

From June sales:

10% x $200.000 20.000
60% x $200.000 120.000
26% x $200.000 52.000
late charge [3% x (200.000 - 20.000 240
- 120.000 - 52.000)]

From July sales:

10% x $190.000 19.000
60% x $190.000 114.000
26% x $190.000 49.400
late charge [3% x (190.000 - 19.000 228
- 114.000 - 49.400)]

From August sales:

10% x $194.000 19.400
60% x $194.000 116.400

From September sales:

10% x $240.000 24.000

Total cash collections: $18.000 $128.000 $186.016 $185.640 $190.028

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