Tara Company's budget shows the following credit sales for the current year: September,$25,000; October,$36,000; November,$30,000; December,$32,000.Experience has shown that payment for credit sales is received as follows: 15% in the month of sale,60% in the first month after sale,20% in the second month after sale,and 5% is uncollectible.How much cash will Tara Company expect to collect in November as a result of current and past credit sales?

Question

Quizplus · Accepted Answer

To calculate the expected cash collection in November, we need to consider the sales made in September, October, and November, and apply the payment percentages given in the problem.

For September sales:
- 15% will be received in September: 0.15 x $25,000 = $3,750
- 60% will be received in October: 0.60 x $25,000 = $15,000
- 20% will be received in November: 0.20 x $25,000 = $5,000
- 5% is uncollectible: 0.05 x $25,000 = $1,250

For October sales:
- 15% will be received in October: 0.15 x $36,000 = $5,400
- 60% will be received in November: 0.60 x $36,000 = $21,600
- 20% will be received in December: 0.20 x $36,000 = $7,200
- 5% is uncollectible: 0.05 x $36,000 = $1,800

For November sales:
- 15% will be received in November: 0.15 x $30,000 = $4,500
- 60% will be received in December: 0.60 x $30,000 = $18,000
- 20% will be received in January: 0.20 x $30,000 = $6,000
- 5% is uncollectible: 0.05 x $30,000 = $1,500

Therefore, the total expected cash collection in November is:
$5,000 (from September sales) + $21,600 (from October sales) + $4,500 (from November sales) = $31,100.

Therefore, the correct choice is D.

Tara Company's Budget Shows the Following Credit Sales for the Current