Answer:
$38,022
Explanation:
Given that the cash collection model is such 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, it means that collection for July would include;
- 10% sales in July
- 75% of 90% of sales in June
- 17% of 90% of sales in May
- 6% of 90% of sales in April
Hence, if It has budgeted April sales of $30,000, May sales of $34,000, June sales of $40,000, July sales of $42,000,
Cash collected in July
= 10% * $42,000 + 75% of 90% * $40,000 + 17% * 90% * $34,000 + 6% * 90% * $30,000
= $4,200 + $27,000 + $5,202 + $1,620
= $38,022
