Figure 9-6. Toscano Company makes all its sales on account.Accounts receivable payment experience is as follows:
Toscano provided information on sales as follows:
Refer to Figure 9-6.What is budgeted cash to be collected on account for the month of August?

Question

Figure 9-6. Toscano Company makes all its sales on account.Accounts receivable payment experience is as follows:
 Toscano provided information on sales as follows:
 Refer to Figure 9-6.What is budgeted cash to be collected on account for the month of August?

Quizplus · Accepted Answer

To calculate the budgeted cash to be collected on account for August, we need to calculate the August sales that have not been collected yet. Based on the payment experience, we estimate that 40% of current month sales will be collected in the same month, and 60% will be collected the following month. Therefore, the budgeted cash to be collected on account for August is:

($180,000 x 40%) + ($240,000 x 60% x 40%) + ($300,000 x 60% x 60%) = $72,000 + $57,600 + $36,790 = $166,390

However, we need to take into account that the company has accounts receivable from the previous month that have not been collected yet. As of July 31, the company had $47,000 in accounts receivable outstanding. We need to subtract this amount from the total budgeted cash to be collected on account for August:

$166,390 - $47,000 = $119,390

Therefore, the best choice is C.