Question

Thirty-five percent of the sales on account are collected in the month of sale, 45% in the month following sale, and the remainder are collected in the second month following sale. The following are budgeted sales data for the company: January February March April Total sales $50,000 $60,000 $40,000 $30,000 What is the amount of cash that should be collected in March

Answer 1

Answer:

The amount of cash collected in March should be:

$51,000.

Explanation:

a) Data and Calculations:

Budgeted sales and Cash Collections:

                                           January    February       March         April

Total sales                         $50,000    $60,000     $40,000    $30,000

Collections:

35% month of sales             17,500       21,000         14,000       10,500

45% month following                            22,500        27,000       18,000

20% second month                                                    10,000

Total collections in March                                       $51,000

b) The above calculations concentrated on the month of March, being the month of interest.  Though, sales on account totals $40,000, the cash collections for the month amounts to $51,000.  This arises from cash collections from the months of January and February.