Question

Gallonte Inc. began operations in April of this year. It makes all sales on account, subject to the following collection pattern: 30% are collected in the month of sale; 60% are collected in the first month after sale; and 10% are collected in the second month after sale. If sales for April, May, and June were $66,000, $86,000, and $76,000, respectively, what were the firm's budgeted collections for April?

Answer 1

Answer:

The budgeted collections for April were $19800.

Explanation:

As all the sales are made on credit, the budgeted collections will depend on the policy of the company to collect cash. The question states that out of the total sales made in a particular month, 30% of these credit sales are paid for by the customers or collected by the company in the month of sale.

Thus, budgeted collections for April were,

Budgeted collections-April = 66000 * 0.3 = $19800