Answer:
Cash collections for October are $174,600
Explanation:
The following information are given for the amounts collected on sales:
month of sale = 55%
month following sale = 35%
second month following sale = 7%
sales uncollectible = 3%
For the month of October, the cash collections will be from July and October sales.
From July sales
October is the month following July sales, therefore, 35% of the sales from July will be collected in October.
July sales = $205,000
percentage collected in October = 35% = 35/100 = 0.35
∴ cash collected in October from July sales = 0.35 × 205,000 = $71,750
From October sales
55% of sales is collectible in the month of sales
Sales in October = $187,000
55% = 55/100 = 0.55
∴ cash collectible from October sales = 0.55 × 187,000 = $102,850
∴ Total cash collections in October = cash from July sales + cash from October sales
= 71,750 + 102,850 = $174,600
