Dove Corporation began its operations on September 1 of the current year. Budgeted sales for the first three months of business are $250,000, $320,000, and $410,000, respectively, for September, October, and November. The company expects to sell 25% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the month of the sale and 30% in the month following the sale.
The cash collections expected in October are
A) $320,000
B) $248,000
C) $304,250
D) $382,500

Question

Quizplus · Accepted Answer

First, we need to calculate the sales on account for each month:

September sales on account = $250,000 x 75% = $187,500
October sales on account = $320,000 x 75% = $240,000
November sales on account = $410,000 x 75% = $307,500

Then, we need to calculate the expected collections for each month:

September collections:
- Cash collections: $250,000 x 25% = $62,500
- Collections from September sales on account: $187,500 x 70% = $131,250
- Total collections: $62,500 + $131,250 = $193,750

October collections:
- Cash collections: $320,000 x 25% = $80,000
- Collections from September sales on account: $187,500 x 30% = $56,250
- Collections from October sales on account: $240,000 x 70% = $168,000
- Total collections: $80,000 + $56,250 + $168,000 = $304,250

November collections:
- Cash collections: $410,000 x 25% = $102,500
- Collections from October sales on account: $240,000 x 30% = $72,000
- Collections from November sales on account: $307,500 x 70% = $215,250
- Total collections: $102,500 + $72,000 + $215,250 = $389,750

Therefore, the cash collections expected in October are $304,250.

Dove Corporation Began Its Operations on September 1 of the Current