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:

September October November December   Budgeted sales $160,000 $166,000 $186,000 $126,000

Explanation / Answer

Answer:

December cash collection from sale = $ 140160

Total collection from sale September October November December September October November December Budgeted sales 160000 166000 186000 126000 Cash sales (20%) 32000 33200 37200 25200 32000 33200 37200 25200 Credit sales (80%) 128000 132800 148800 100800 Collections from credit sales : September 64000 64000 October 38400 66400 104800 November 19200 39840 74400 133440 December 19920 44640 50400 114960 Monthly collection from sale 96000 138000 170640 140160

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