Shown below are the budgeted sales for ABC Company for the next six months: Sale

Question

 Shown below are the budgeted sales for ABC Company for the next six months:                     Sales for Cash     Sales on Account  January               $15,000             $ 70,000 February              $18,000             $ 80,000 March                 $14,000             $160,000 April                 $26,000             $120,000 May                   $18,000             $170,000 June                  $24,000             $105,000  On average, 35% of the sales on account are collected in the month of sale, 40% are collected in the month following sale, 10% are collected in the second month following sale, and the remaining 15% is collected three months after the month of sale.  Calculate the expected cash collections for April.

Explanation / Answer

Expected cash collections for April=26000+(April*0.35)+(March*0.4)+(0.1*February)+(0.15*January)

=26000+(0.35*120,000)+(0.4*160,000)+(0.1*80000)+(0.15*70,000)

which is equal to

=$150500.

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