Nuthatch Corporation began its operations on September 1 of the current year. Bu
ID: 2570271 • Letter: N
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 $248,000, $320,000, and $418,000, 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 October from accounts receivable are estimated to be
$256,704
$213,920
$144,480
$179,200
Explanation / Answer
Solution:
We need to prepare the Schedule of Budgeted Cash Collection.
Cash Sales are collected in the month of sales since it is cash.
Credit Sales schedule for collection is given. 80% of Credit Sales are collected in same month. For Example September months’ credit sales are 70% of total sales and 80% from this credit sales to be collected in September and 20% is collected in October..
September
October
November
Budgeted Sales
$248,000
$320,000
$418,000
Cash Sales (30% of Sales)
$74,400
$96,000
$125,400
Credit Sales (70%)
$173,600
$224,000
$292,600
Schedule for Cash Collection from Credit Sales
September Credit Sales
$138,880
34720
(173600*20%)
October Credit Sales
179200
(224000*80%)
$44,800
November Credit Sales
$234,080
Total Budgeted Cash Collection from Credit Sales or Accounts Receivable
$138,880
$213,920
$278,880
Total Cash Collection expected in October from Accounts Receivable are estimated to be $213,920
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September
October
November
Budgeted Sales
$248,000
$320,000
$418,000
Cash Sales (30% of Sales)
$74,400
$96,000
$125,400
Credit Sales (70%)
$173,600
$224,000
$292,600
Schedule for Cash Collection from Credit Sales
September Credit Sales
$138,880
34720
(173600*20%)
October Credit Sales
179200
(224000*80%)
$44,800
November Credit Sales
$234,080
Total Budgeted Cash Collection from Credit Sales or Accounts Receivable
$138,880
$213,920
$278,880
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