A company is formulating its plans for the coming year, including the preparation of its cash...
A company is formulating its plans for the coming year, including the preparation of its cash budget. Historically, the company's sales are 30% cash. The remaining sales are on credit with the following collection pattern:
|
Collections on Account |
Percentage |
|
|
In the month of sale |
40% |
|
|
In the month following the sale |
58% |
|
|
Uncollectible |
2% |
|
Sales for the first 5 months of the coming year are forecast as follows:
|
January |
$3,500,000 |
|
February |
3,800,000 |
|
March |
3,600,000 |
|
April |
4,000,000 |
|
May |
4,200,000 |
For the month of April, the total cash receipts from sales and collections on account would be
|
$3,729,968 |
||
|
$3,781,600 |
||
|
$4,025,200 |
||
|
$4,408,000 |
Homework Answers
| Answer | |
| The option B is correct : $ 3,781,600 | |
| Explanation | |
| for the month of April cash collections will be $3,781,600 calculated as follows: | |
| April cash sales = 30% of 4000,000 | $1,200,000 |
| rest credit sale 70% of $4000,000 =$2800000 | $1,120,000 |
| of which 40% collected in same month = 2800000 @40% | |
| March 70% credit sale = 2520000 of whcih 58% is collected in April | $1,461,600 |
| $3,781,600 | |
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