A company is preparing its cash budget. Its cash balance on January 1 is $290,000, and it has a minimum cash requirement of $340,000. The following data have been provided:
-A company's history indicates that 20% of its sales are for cash and the rest are on credit. Collections on credit sales are 20% in the month of the sale, 50% in the next month, 25% the following month, and 5% is uncollectible. Projected sales for December, January, and February are $60,000, $85,000, and $95,000, respectively. The February expected cash receipts from all current and prior credit sales are
A)$61,200
B)$57,000
C)$66,400
D)$90,250

Question

A company is preparing its cash budget. Its cash balance on January 1 is $290,000, and it has a minimum cash requirement of $340,000. The following data have been provided:  ​
-A company's history indicates that 20% of its sales are for cash and the rest are on credit. Collections on credit sales are 20% in the month of the sale, 50% in the next month, 25% the following month, and 5% is uncollectible. Projected sales for December, January, and February are $60,000, $85,000, and $95,000, respectively. The February expected cash receipts from all current and prior credit sales are
A)$61,200 
B)$57,000 
C)$66,400 
D)$90,250

Quizplus · Accepted Answer

Explanation:Cash sales for December = $60,000 * 20% = $12,000Credit sales for December = $60,000 * 80% = $48,000Cash collections from December credit sales:In December = $48,000 * 20% = $9,600In January = $48,000 * 50% = $24,000In February = $48,000 * 25% = $12,000Cash sales for January = $85,000 * 20% = $17,000Credit sales for January = $85,000 * 80% = $68,000Cash collections from January credit sales:In January = $68,000 * 20% = $13,600In February = $68,000 * 50% = $34,000In March = $68,000 * 25% = $17,000Cash sales for February = $95,000 * 20% = $19,000Credit sales for February = $95,000 * 80% = $76,000Cash collections from February credit sales:In February = $76,000 * 20% = $15,200Total expected cash receipts in February = $12,000 + $9,600 + $24,000 + $12,000 + $17,000 + $13,600 + $34,000 + $17,000 + $19,000 + $15,200 = $61,200

A Company Is Preparing Its Cash Budget