Question

Justin Company's budget includes the following credit sales for the current year: September, $27,000; October, $38,000; November, $32,000; December, $34,000. Credit sales are collected as follows: 10% in the month of sale, 65% in the first month after sale, 23% in the second month after sale, and 2% is uncollectible. How much cash can Justin expect to collect in November as a result of current and past credit sales

Answer 1

Answer:

Total Cash to collect in November is $34,110.

Explanation:

To determine how much cash can Justin expect to collect in November, we prepare a Trade Receivables Budget.

Trade Receivables Budget

                                   September        October         November

Balance b/d                       $0               $24,300          $40,950

Credit Sales                  $27,000         $38,000           $32,000

Cash Received - 10%    ($2,700)          ($3,800)           ($3,200)

Cash Received - 65%            $0          ($17,550)         ($24,700)

Cash Received - 23%            $0                   $0             ($6,210)

Balance c/d                  $24,300          $40,950           $38,840

Therefore,

Total Cash to collect in November is $34,110 ($3,200 + $24,700 + $6,210).