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The accounting records of Backspace, Inc., revealed an accounts receivable balance of $195,000 on January 1 of the current year.
The accounting records of Backspace, Inc., revealed an accounts receivable balance of $195,000 on January 1 of the current year. Forty percent of the company's sales are for cash, and the remaining 60% are on account. Of the credit sales, 30% are collected in the month of sale and 70% are collected in the following month. Total sales in January and February are expected to amount to $500,000 and $530,000, respectively. Assume that in the latter half of the year, Backspace hired a new sales manager who aggressively tried to maximize the company's market share. She implemented a compensation system for the sales force that was 100% commission based, with the commission calculated on the basis of gross sales dollars. Sales volume increased dramatically in a very short period of time, and the sales and collection patterns changed, as follows
