Question

Trumbull Corporation budgeted sales on account of $120,000 for July, $211,000 for August, and $198,000 for September. Experience indicates that none of the sales on account will be collected in the month of the sale, 60% will be collected the month after the sale, 36% in the second month, and 4% will be uncollectible. The cash receipts from accounts receivable that should be budgeted for September would be:

Answer 1

Answer:

$169,800

Explanation:

Data provided

Second month percentage = 36%

July sales = $120,000

Collected the month after the sale = 60%

August sales = $211,000

The computation of cash receipts from accounts receivable is shown below:-

The budgeted cash collections  September = (Second month percentage × July sales) + (Collected the month after the sale × August sales)

= ( 36% × $120,000) + (60% × $211,000)

= $169,800

Therefore we applied the above formula.