Nuthatch Corporation began its operations on September 1 of the current year. Bu

Question

Nuthatch Corporation began its operations on September 1 of the current year. Budgeted sales for the first three months of business—September, October, and November—are $234,000, $312,000, and $410,000, respectively. The company expects to sell 30% of its merchandise for cash. Of sales on account, 80% are expected to be collected in the month of the sale and 20% in the month following the sale.

The cash collections expected in September from accounts receivable are estimated to be

a.$131,040

b.$163,800

c.$280,800

d.$234,000

Explanation / Answer

a.$131,040

The cash collections expected in September from accounts receivable are estimated to be:

= $234,000 * 70% * 80%

= $131,040

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