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 made in 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?

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July sales = $475,000. Cash sales (40%) = $190,000. Credit sales (60%) = $285,000. From credit sales, all collections are completed by the end of the following month. Therefore, July's cash collections include July's cash sales ($190,000) plus collections from June's credit sales. June's credit sales = 60% of $375,000 = $225,000. Thus, July's collections = $190,000 (July cash sales) + $225,000 (June credit sales collected in July) + $42,000 (remaining from May's credit sales, as August 31 accounts receivable is $108,000, which is 60% of August's sales, indicating July's credit sales are fully collected by the end of August) = $457,000.

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