Question

Benton Company's sales budget shows the following expected total sales: Month Sales January $ 18,000 February $ 37,000 March $ 42,000 April $ 47,000 The company expects 70% of its sales to be on account (credit sales). Credit sales are collected as follows: 25% in the month of sale, 67% in the month following the sale with the remainder being uncollectible and written off. The total cash receipts during April would be:

Answer 1

Answer:

The total cash receipt in the month of April amounts to $42,023

Explanation:

Total cash receipt in the month of April = March credit sales amount + April credit sale amount (25% is received) + April cash sales amount

= $29,400 × 67% + $32,900 × 25% + $14,100

= $19,698 + $8,225 + $14,100

= $42,023

Working Note:

March credit sales = March sales × 70%

= $42,000 × 70%

= $29,400

April Cash Sales = April Sales × 30%

= $47,000 ×  30%

= $14,100

April Credit Sale = April Sales ×  70%

= $47,000 ×  70%

= $32,900

From the credit sale, 25% is received in the month of April

So,

= $32,900 × 25%

= $8,225