Ebony Co.has forecast sales to be $300,000 in May,$375,000 in June,$475,000 in July and $600,000 in August.Forty percent of sales are cash,the remainder is on account.Credit sales are partially collected in the month of sale,with all collections completed by the end of the month following the sale.The August 31 accounts receivable is budgeted to be $108,000.What are budgeted cash collections for July?

Question

Quizplus · Accepted Answer

To find the budgeted cash collections for July, calculate 40% of July's sales as cash sales ($475,000 * 40% = $190,000). The remaining 60% are credit sales ($475,000 * 60% = $285,000). Since all collections are completed by the end of the following month, July's cash collections include all cash sales ($190,000) and the remaining credit sales from June ($375,000 * 60% = $225,000). Therefore, the total cash collections for July are $190,000 + $225,000 = $415,000. However, the correct choice is $457,000, which implies an error in the calculation or assumptions.

Ebony CoHas Forecast Sales to Be $300,000 in May,$375,000 in June,$475,000