Question

Justin Company's budget includes the following credit sales for the current year: September, $25,000; October, $36,000; November, $30,000; December, $32,000. Credit sales are collected as follows: 15% in the month of sale, 60% in the first month after sale, 20% in the second month after sale, and 5% is uncollectible. How much cash can Justin expect to collect in November as a result of current and past credit sales

Answer 1

Answer:

$31,100

Explanation:

Calculation to determine How much cash can Justin expect to collect in November as a result of current and past credit sales

First step is to calculate November sales

November sales =(15% × $30,000)

November sales=$4,500

Second step is to calculate October sales

October sales= (60% × $36,000)

October sales=$21,600

Third step is to calculate September sales

September sales=(20% × $25,000)

September sales=$5,000

Now let calculate the Total cash receipts using this formula

Total cash receipts=September sales+October sales+November sales

Let plug in the formula

Total cash receipts=$4,500+$21,600+$5,000

Total cash receipts=$31,100

Therefore the amount of cash that Justin can expect to collect in November as a result of current and past credit sales is $31,100