A company is preparing its cash budget. Its cash balance on January 1 is $290,000, and it has a minimum cash requirement of $340,000. The following data have been provided:
-Tara Company's budget shows the following credit sales for the current year: September, $25,000; October, $36,000; November, $30,000; December, $32,000. Experience has shown that payment for credit sales is received as follows: 15% in the month of sale, 60% in the first month after sale, 20% in the second month after sale, and 5% is uncollectible. The amount of cash Tara Company will expect to collect in November as a result of current and past credit sales is

Question

A company is preparing its cash budget. Its cash balance on January 1 is $290,000, and it has a minimum cash requirement of $340,000. The following data have been provided:  ​
-Tara Company's budget shows the following credit sales for the current year: September, $25,000; October, $36,000; November, $30,000; December, $32,000. Experience has shown that payment for credit sales is received as follows: 15% in the month of sale, 60% in the first month after sale, 20% in the second month after sale, and 5% is uncollectible. The amount of cash Tara Company will expect to collect in November as a result of current and past credit sales is

Quizplus · Accepted Answer

In November, Tara Company will collect cash from sales made in September, October, and November. The collections are calculated as follows:- From September sales ($25,000):  - 20% in the second month after sale: 0.20 * $25,000 = $5,000- From October sales ($36,000):  - 60% in the first month after sale: 0.60 * $36,000 = $21,600- From November sales ($30,000):  - 15% in the month of sale: 0.15 * $30,000 = $4,500Adding these amounts together: $5,000 + $21,600 + $4,500 = $31,100.

A Company Is Preparing Its Cash Budget