Budgeted sales in Allen Company over the next four months are given below: 20 pe

Question

Budgeted sales in Allen Company over the next four months are given below:

20 percent of the company's sales are for cash and 80% are on account. Collections for sales on account follow a stable pattern as follows: 50% of a month's credit sales are collected in the month of sale, 30% are collected in the month following sale, and 15% are collected in the second month following sale. The remainder is uncollectible. Given these data, cash collections for December should be:

Explanation / Answer

Statement showing Cash collections Particulars September October November December Budgeted Sales                30,000.00             91,000.00 175,000.00      115,000.00 Cash sales @20%    (a)                  6,000.00             18,200.00     35,000.00         23,000.00 Credit Sales@80%                24,000.00             72,800.00 140,000.00         92,000.00 Collection in same month@50% (b)                12,000.00             36,400.00     70,000.00         46,000.00 Collection in nextmonth@30% (c)                7,200.00     21,840.00         42,000.00 Collection in next to next month@15% (d)        3,600.00         10,920.00 Total collections a+b+c+d                18,000.00             61,800.00 130,440.00      121,920.00

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