Budgeted sales in Allen Company over the next four months are given below: 20 pe
ID: 2449978 • Letter: B
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:
September October November December Budgeted sales $70,000 $131,000 $179,000 $119,000Explanation / Answer
Cash Collections for December
From Sales in December (Cash Sales @ 20%) = $ 23,800
From Sales in December (Credit Sales @ 80% X 50%) = $ 47,600
From Sales in October (Credit Sales @ 80% X 15%) = $ 15,720
From Sales in November (Credit Sales @ 80% X 30%) = $ 42,960
Total Cash Collections in December = $ 130,080
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