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:

A. $176,640

B. $143,040

C. $211,350

D. $172,350

Explanation / Answer

Cash collection of october month sale (169,000*80%)*15% = 20,280 Cash collection of november month sale (189,000*80%)*30% = 45,360 Cash sales on December 129,000*20% = 25,800 Cash collection of December month sale (129,000*80%)*50% = 51,600 December month cash collection                                            1,43,040

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