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 uncollectable. Given these data, cash collections for December should be: $123,960. $149,150 $179,900. $150,960.

Explanation / Answer

Cash Collection Amount Cash sales In December ($116,000*20%) $23,200 Credit sales In December ($116,000*80%50%) $46,400 Credit sales In Nov ($176,000*80%*30%) $42,240 Credi Sales In Oct ($101,000*80%*15%) $12,120 Total Cash Collection In December $123,960

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