Question

Use the information below for Nuthatch Corporation to answer the question that follow. Nuthatch Corporation began its operations on September 1 of the current year. Budgeted sales for the first three months of business-September, October, and November-are $248,000, $304,000, and $424,000, respectively. The company expects to sell 30% of its merchandise for cash. Of sales on account, 80% are expected to be collected in the month of the sale and 20% in the month following the sale. The cash collections expected in September from accounts receivable are estimated to be O
a. $248,000
b. $138,880
c. $173,600
d. $297,600

Answer 1

Answer:

b. $ 138,880 is the amount of cash collections for September

Explanation:

The amount of cash collections for the month of September is determined as follows:

Sales for September is                                                            $ 248,000

The cash sale portion is 30 % so (248,000 * 30%)               $ (  74,400)

Remaining sales for September is on credit                         $  173,600

The cash collections in the month of sales is 80 %,  

Credit sales - $ 173,600 * 80 %=                                            $ 138,880