Lara Company's budget includes 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 the 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. How much cash can Lara Company expect to collect in November as a result of current and past credit sales?

Question

Quizplus · Accepted Answer

To calculate the cash collected in November, we have to consider the sales made in September, October, and November as well as the collection pattern. Here's how to calculate it:

- September sales: $25,000 x 15% = $3,750 collected in September
- October sales: $36,000 x 15% = $5,400 collected in October
                 $36,000 x 60% = $21,600 collected in November
- November sales: $30,000 x 15% = $4,500 collected in November
                 $30,000 x 60% = $18,000 collected in December
- December sales: $32,000 x 15% = $4,800 collected in December
                 $32,000 x 60% x 20% = $3,840 collected in January
                 $32,000 x 5% = $1,600 uncollectible

Total expected cash collections for November = $3,750 + $5,400 + $4,500 = $13,650
Therefore, the correct answer is D) $31,100.

Lara Company's Budget Includes the Following Credit Sales for the Current