Fasthound Express prepared the following sales budget:
$$\begin{array} { | l | l | l | }
\hline \text { Month } & \text { Cash Sales } & \text { Credit sales } \
\hline \text { March } & \$ 10,000 & \$ 20,000 \
\hline \text { April } & \$ 20,000 & \$ 30,000 \
\hline \text { May } & \$ 30,000 & \$ 40,000 \
\hline \text { June } & \$ 40,000 & \$ 50,000 \
\hline
\end{array}$$ Credit collections are 50% in the month of sale, 40% in the month following the sale, and 5% two months following the sale. The remaining 5% is expected to be uncollectible.
What are the total budgeted cash collections for May?

Question

Fasthound Express prepared the following sales budget:
$$\begin{array} { | l | l | l | } 
\hline \text { Month } & \text { Cash Sales } & \text { Credit sales } \
\hline \text { March } & \$ 10,000 & \$ 20,000 \
\hline \text { April } & \$ 20,000 & \$ 30,000 \
\hline \text { May } & \$ 30,000 & \$ 40,000 \
\hline \text { June } & \$ 40,000 & \$ 50,000 \
\hline
\end{array}$$ Credit collections are 50% in the month of sale, 40% in the month following the sale, and 5% two months following the sale. The remaining 5% is expected to be uncollectible.
What are the total budgeted cash collections for May?

Quizplus · Accepted Answer

For May, the total budgeted cash collections include cash sales for May and collections from credit sales in March, April, and May. Cash sales in May are $30,000. From credit sales: - 50% of May's credit sales ($40,000) = $20,000 - 40% of April's credit sales ($30,000) = $12,000 - 5% of March's credit sales ($20,000) = $1,000. Adding these amounts gives $30,000 + $20,000 + $12,000 + $1,000 = $63,000.

Fasthound Express Prepared the Following Sales Budget Credit Collections Are 50% in the Month of Sale, 40