Question 1 Oak Furniture provided the following information relevant to its sale

Question

Question 1 Oak Furniture provided the following information relevant to its sales for December 2013 and the first quarter of 2014:

Based on the company's collection history, 6% of credit sales are uncollectible, 44% are collected in month of sale and the remainder collected in the following month.
Cash collections in January from December 2013 credit sales would be:

A. $32,000.

B. $35,840.

C. $50,000.

D. $45,320.

Question 2

Meredith Company has completed its sales budget for the first quarter of 2014. Projected credit sales for the first four months of the year are shown below:

The company's past records show collection of credit sales as follows: 24% in the month of sale and the balance in the following month. The total cash collection from receivables in March is expected to be:

A. $36,840.

B. $39,000.

C. $25,440.

D. $32,160.

Dec. 2013 Jan. 2014 Feb. 2014 (Actual) (Budgeted) (Budgeted)   Credit sales $ 64,000 $ 144,000 $ 159,000   Cash sales $ 14,000 $ 29,000 $ 34,000

Explanation / Answer

Answer to the 1st question:

Cash collections in January from December 2013 credit sales would be:

Credit sales in december *(100-6-44)% = $64,000*50 % = $32,000 (Option A)

2)

Total cash collection from receivables in March is expected to be:

24% of March month credit sales = $39,000*24% = $9,360

76% of february month credit sales = $30,000*76% = $22,800

Total = $32,160 (Option - D)

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.