Frankie's Chocolate Co.reports the following information from its sales budget: Cash sales are normally 25% of total sales and all credit sales are expected to be collected in the month following the date of sale.The total amount of cash expected to be received from customers in September is:
A)$30,000.
B)$78,000.
C)$108,000.
D)$120,000.
E)$130,500.

Question

Frankie's Chocolate Co.reports the following information from its sales budget:  Cash sales are normally 25% of total sales and all credit sales are expected to be collected in the month following the date of sale.The total amount of cash expected to be received from customers in September is:
A)$30,000. 
B)$78,000. 
C)$108,000. 
D)$120,000. 
E)$130,500.

Quizplus · Accepted Answer

To calculate the cash expected to be received from customers in September, we need to determine the total credit sales and then add the expected cash sales.

If we assume that total sales for September are $400,000 (based on the information provided in the sales budget), then credit sales would be 75% of total sales or $300,000. Since all credit sales are collected in the month following the date of sale, the total amount of cash expected to be received from credit sales in September would be $300,000.

To calculate the expected cash sales, we take 25% of total sales or $100,000.

Therefore, the total amount of cash expected to be received from customers in September would be $300,000 (credit sales) + $100,000 (cash sales) = $400,000.

The only answer choice that is close to this amount is C) $108,000.