A company is formulating its plans for the coming year, including the preparation of its cash budget. Historically, the company's sales are 30% cash. The remaining sales are on credit with the following collection pattern: Collections on Account Percentage In the month of sale 40%

In the month following the sale 58%

Uncollectible 2%

Sales for the first 5 months of the coming year are forecast as follows:

January $3,500,000

February 3,800,000

March 3,600,000

April 4,000,000

May 4,200,000

For the month of April, the total cash receipts from sales and collections on account would be

a. $3,729,968

b. $3,781,600

c. $4,025,200

d. $4,408,000

Question

Business

Nehemiah Bailey

11 January, 13:16

A company is formulating its plans for the coming year, including the preparation of its cash budget. Historically, the company's sales are 30% cash. The remaining sales are on credit with the following collection pattern: Collections on Account Percentage In the month of sale 40%

In the month following the sale 58%

Uncollectible 2%

Sales for the first 5 months of the coming year are forecast as follows:

January $3,500,000

February 3,800,000

March 3,600,000

April 4,000,000

May 4,200,000

For the month of April, the total cash receipts from sales and collections on account would be

a. $3,729,968

b. $3,781,600

c. $4,025,200

d. $4,408,000

+5

Answers (1)

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Dickens · Answer 1

c. $4,025,200

Explanation:

The computation of the total cash receipts from sales and collections in April month is shown below:

= April sales * cash sales percentage + April sales * credit sales percentage * collection month percentage + March sales credit sales percentage * Following month collection percentage

= $4,000,000 * 30% + $4,000,000 * 70% * 40% + $4,200,000 * 70% * 58%

= $1,200,000 + $1,120,000 + $1,705,200

= $4,025,200

Since cash sales are 30%, so the credit sales would be 70%