(Appendix 10A) Taft Corporation collects cash from customers as follows: 60% in the month of sale, 20% in the month after sale, 19% in the second month after sale, and 1% is never collected. Bad debts are written off annually in December. Budgeted sales are all on credit and amount to:
May $600,000
June 700,000
July 500,000
August 600,000
What is the budgeted amount of cash to be collected in July?
A) $560,000
B) $554,000
C) $558,000
D) $551,000

Question

Quizplus · Accepted Answer

To determine the budgeted amount of cash to be collected in July, we need to use the collection percentages provided in the problem.

For May sales: 60% will be collected in May, 20% in June, and 19% in July. 
For June sales: 60% will be collected in June, 20% in July, and 19% in August.
For July sales: 60% will be collected in July, 20% in August, and 19% in September.

Using these percentages, we can calculate the budgeted amount of cash to be collected in July as follows:

July sales: $500,000 x 60% = $300,000 
June sales collected in July: $700,000 x 20% = $140,000 
May sales collected in July: $600,000 x 19% = $114,000

Total cash to be collected in July: $300,000 + $140,000 + $114,000 = $554,000

Therefore, the correct answer is B) $554,000.

(Appendix 10A) Taft Corporation Collects Cash from Customers as Follows