Question

The Model Company is to begin operations in April. It has budgeted April sales of $46,000, May sales of $50,000, June sales of $56,000, July sales of $58,000, and August sales of $54,000. Note that 10% of each month's sales is expected to represent cash sales; 75% of the balance is expected to be collected in the month following the sale, 17% the second month, 6% the third month, and the balance is expected to be uncollectible.
What is the amount of cash to be collected in the month of July?

Multiple Choice

$48,082.

$53,734.

$59,000.

$53,110.

Answer 1

Answer:

The correct answer is B

Explanation:

The amount of cash to be collected or received  in the month of July is computed as:

Amount of cash received in the July month = (July Sales × 10%) + (June Sales × 90% × 75%) + (May Sales × 90% × 17%) + (April Sales × 90% × 6%)

where

July Sales is $58,000

June Sales is $56,000

May Sales is $50,000

April Sales is $46,000

Putting the values:

= ($58,000 × 10%) + ($56,000 × 90% × 75%) + ($50,000 × 90% × 17%) + ($46,000 × 90% × 6%)

= $5,800 + $37,800 + $7,650 + $2,484

= $53,734