Question

Ruiz Co.’s budget includes the following credit sales for the current year: September, $157,000; October, $148,000; November, $132,000; December, $169,000. Credit sales are collected as follows: 20% in the month of sale, 50% in the first month after sale, and 30% in the second month after sale. How much cash can the company expect to collect in December as a result of current and past credit sales?

Answer 1

Answer:

$144,200

Explanation:

Collection in December -

Given,

September = $157,000;

October = $148,000;

November = $132,000;

December = $169,000.

Conditions -

1. 20% in the month of sale - December sale = $169,000 x 20% = $33,800

2. 50% in the first month after sale,

therefore, December will be first month of the sale of the month of November's collection = $132,000 x 50% = $66,000

3. 30% in the second month after sale,

therefore, December will be second month of the sale of the month of October's collection = $148,000 x 30% = $44,400

Therefore, December's collection = $(33,800 + 66,000 + 44,400)

= $144,200