Question

Assume a company is preparing a budget for its first two months of operations. During the first and second months it expects credit sales of $40,000 and $61,000, respectively. The company expects to collect 30% of its credit sales in the month of the sale, 60% in the following month, and 10% is deemed uncollectible. What amount of cash collections from credit sales would the company include in its cash budget for the second month

Answer 1

Answer:

Total cash collection= $42,300

Explanation:

Giving the following information:

Sales:

First month= $40,000

Second month= $61,000

The company expects to collect 30% of its credit sales in the month of the sale, 60% in the following month.

Cash collection Second month:

Cash collection credit sales from the second month= (61,000*0.3)= 18,300

Cash collection credit sales from the first month= (40,000*0.6)= 24,000

Total cash collection= $42,300